Petition for Writ of Certiorari — Capital Airlines, Inc. v. Civil Aeronautics Board

IN THE — sas

Supreme Court of the Gnited States

Ocroper Term 1948

No.

CaprraL Arruings, Inc., Petitioner

against

Civ. Arronavutics Boarp, Respondent

PETITION OF CAPITAL AIRLINES, INC., FOR WRIT

OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE DISTRICT

OF COLUMBIA CIRCUIT.

and

SUPPORTING BRIEF

J Cuaries H. Murcuison

Attorney for Petitioner,

Capital Airlines, Inc.

Srockton, Utmer & Murcuison

1016 Ring Building

Washington 6, D. C.

Of Counsel

a

Press or Byron S. ApAMs, WASHINGTON, D.C.

INDEX.

Page

Petition FOR Writ oF CERTIORARI.................0. 1

Statement of the Matter Involved............... 1

Jurisdictional Statement .... ..............0005 4

The Questions Presented. ..............ceceee 4

Reasons For Allowance of the Writ.............. 7

Brier iN Support oF Petition FOR CERTIORARI........ 9

NN SIE SII. is i wn ok 0K ewe pa xed ican 9

Re MR nnd k 50ndccsakcceaeidecs 10

Point I. To discharge the full obligation of the

Fifth Amendment the Board must have

the power to raise an existing rate retro-

IE dda kb 40a cukeennaeeesnabekeses 11

Point Il. The Board’s power to revise its order

of December 16, 1942 was not lost by the

elapse of 15 days beAGasandcinesbacees 17

he ee ee et 20

TABLE OF CASES CITED.

Alaska Airlines, Inc., Mail Rates, Order No. 1885,

NE EE a bc ah e de checked sda bkcdueic uuu 15, 16

Banton v. Belt Line Ry. Corp., 268 U. S. 413, 69 L. Ed.

Mist c.eetek cine ks cebanee ohne 14

Chicago & Northwestern R. Co. v. United States, 104

eo 8 3 UN error Tree 15

Chicago € Southern Air Lines, Inc., Mail Rates, Order

No. E-1097, January 5, 1948.................08. 17

City of Loutsviile v. Cumberland T. & T. Co., 225 U. S.

@50, G6 is. Hid. 1261, 338 GB. Ct. Tad... cece 12

oy

ii Index Continued.

Page

Des Moines Gas Co. v. Des Moines, 238 U. S. 153, 59

oe & & Fe ere errr ee 10

Essair, Inc., Temporary Mail Rates, 6 C. A. B. 687... 17

Federal Power Commission v. Hope Natural Gas Co.,

320 U. S. 591, 88 L. Ed. 333, 64S. Ct. 281......... 6

Froeber-Norfleet v. Southern Railway Co., 9 F. Supp.

ee Ge Bs ee hie Ka dediwb wh oh. cisnGs <eaeees 19

Gage v. Gunther, 136 Cal. 338, 68 Pac. 710............ 19

Market Street R. Co. v. Railroad Comm. of California,

324 U. S. 548, 89 L. Ed. 1171, 65 S. Ct. 770........ 14

Omaha v. Omaha Water Co., 218 U.S. 180, 54 L. Ed. 991,

eh SE abies bet Rk kdb bes 64 Conekeeuabusn de 14

St. Louis, Brownsville € Mexico R. v. United States,

268 U. S. 169, 69 L. Ed. 899, 45 S. Ct. 472........ 16

Transcontinental & Western Air, Inc. v. Civil Aeronau-

tics Board, United States Supreme Court, Docket

No. 387 (October Term 1948)................... 7,1

Umited States v. Griffin, 303 U. S. 226, 82 L. Ed. 764,

ha cet ein io lalbs Lon dcgduebs cucunne 12,13

United States v. New York Central R. Co., 279 U.S. 73,

73 L. Ed. 619, 49'S. Ct. 260................ 5, 7, 13, 15

West Ohio Gas Co. v. Public Utilities Commission, 294

U. 8. 79, 79 1. Mid. 778, 55 &. Ct, $394.............. 10

Wilcox v. Consolidated Gas Co., 212 U. S. 19, 53 L. Ed.

eg RR rl ees ae eee 12

TABLE OF STATUTES CITED.

Civil Aeronautics Act of June 23, 1948, c. 601 (52 Stat.

977 ff., 49 U. S. C. §§ 401-681).......... 2, 5, 11, 12, 13

Section 406(a), Authority to fix rates (52 Stat.

Gam, OD U. B.C. § GUGEa)) «wn nn ccc ccccccccns 2,11

Section 1005, Orders, notices and service (52

Stat. 1063, 2 U. B.C. § 665). .... 2... 0.055. 7

(d) Suspension or modification or order...... 18

Section 1006(f), Certification or certiorari (52

Stat. 1024, 49 U.S. C. § 646 (f))............ 4

-

Index Continued. iii

Page

Interstate Commerce Act of February 4, 1887, c. 104,

part I (24 Stat. 384, 49 U. S.C. § |) ere 18

Railway Mail Pay Act of July 28, 1916, c. 261 (39 Stat.

425 ff., 39 U. 8. C. $§ 524 fF.) .. 2... cece cee ecneee 5, 15

28 U. S.C. § 1254 (See Pub. L. 733, 80th Cong., 2d Sess.) 4

OTHER AUTHORITIES.

Civil Aeronautics Board, Memoranda

May 22, 1942 .. 1... cc cccenccccncncncccccccces 3

Fam B, TRGB. oon ccs csccccceccssesscseteasues 3

Rules of Practice of Civil Aeronautics Board

Ns a auatnekeenaeae ee 6, 7,11, 17,18

Rules of Practice of Interstate Commerce Commission

|) errr rerrr rig e Titer rts te 18, 19

a

IN THE

Supreme Court of the Anited States

Ocroser Term 1948

No.

CapiTaL Arruines, Inc., Petitioner

against

Crvit AEronavutics Boarp, Respondent

PETITION OF CAPITAL AIRLINES, INC., FOR WRIT

OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE DISTRICT

OF COLUMBIA CIRCUIT.

To the Honorable Fred M. Vinson, Chief Justice of the

United States, and the Associate Justices of the Supreme

Court of the United States:

The petitioner, Capital Airlines, Inc., respectfully shows

to this Court:

STATEMENT OF THE MATTER INVOLVED

Petitioner is an air carrier engaged in transporting per-

sons, property and mail by aircraft in the United States

under certificates of public convenience and necessity is-

sued to it by the respondent, Civil Aeronautics Board, un-

2

der the Civil Aeronautics Act of 1938, as amended (52 Stat.

977 ff., 49 U. S. C. §§ 401-680).

Under the terms of the Act, Capital, like all other exist-

ing air carriers, was compelled to obtain such a certificate

as a condition to remaining in business. The Act compelled

Capital to transport the mails and to render other services

to the Government required for the commerce of the United

States, the Postal Service, and the national defense. The

only machinery provided by the Act for the ascertainment

and payment of just compensation for these compelled

services was that created by Section 406 (a).

Section 406 (a) of the Act empowers and directs the

Board, upon its own initiative or upon petition of the Post-

master General or an air carrier, ‘‘to fix and determine

from time to time, after notice and hearing, the fair and

reasonable rates of compensation for the transportation

of mail by aircraft . . . by each holder of a certificate au-

thorizing the transportation of mail by aircraft, and to

make such rates effective from such date as it shall deter-

mine to be proper. . .’’ In determining a fair and reason-

able rate and the proper date from which it should be effec-

tive, the Board was directed to consider the need of a car-

rier for compensation sufficient to insure the performance

of all of the compelled services.

On October 8, 1940, the Board instituted a proceeding

to determine the fair and reasonable rate of compensation

to be received by Capital for the period beginning October

9, 1940. While the proceeding was pending, Capital, on

1In this petition and accompanying brief the Civil Aeronautics

Board and its predecessor, the Civil Aeronautics Authority, will

be called the ‘‘Board’’. The Civil Aeronautics Act of 1938 (Act

of June 23, 1938, ec. 601, 52 Stat. 977 ff., 49 U. S. C. § 401-680) will

be called the ‘‘Act’’. Petitioner will be called ‘‘Capital’’. In the

proceeding before the Board Petitioner was called ‘‘ Pennsylvania-

Central Airlines Corporation’’. Its corporate name has since been

legally changed to Capital Airlines, Inc., and its certificates of

public convenience and necessity reissued in the new name.

All italics are ours unless otherwise specified.

Numerical references in parentheses refer to pages of the Record

filed with this Court.

3

June 26, 1942, filed a petition therein representing that on

account of the uncertainty of future events and conditions

resulting from a state of war it was impossible to fix a

rate for the future which would have any likelihood of

being fair and reasonable, and requesting that the rate to

be fixed for the period beginning June 1, 1942 be made

tentative and subject to future review and reconsideration.

(7-10) Within a few weeks prior to the filing of said peti-

tion, the Board had found, on its own initiative, as ex-

pressed in Memoranda to the Presidents of the air carriers

dated May 22nd and June 3rd, 1942, that:

‘‘Because of the uncertainties inherent in the present

situation . . . it is not feasible to fix fair and reason-

able rates for the future on the information presently

available. . .’’ (115)

and that:

“Tt is recognized that the forecasting of the future un-

der existing circumstances is extremely difficult, if not

impossible.’’ (119)

On December 16, 1942, the Board entered an order fixing

a mail rate to determine the compensation to be paid Cap-

ital for services rendered during the past period from

October 9, 1940 to May 31, 1942 and also a rate to be paid

for the future period beginning June 1, 1942. The order

stated that in accordance with Petitioner’s request above

mentioned, the rate to become effective as of June 1, 1942

would be subject to reconsideration and review from and

after that date upon Petitioner’s request filed pursuant to

Rule 8 of the Board’s Rules of Practice. (4 C. A. B. at 25)

In accordance with the procedure prescribed in said or-

der, Capital filed a petition with the Board on January 14,

1947, representing that the amount of pay it had received

for services rendered subsequent to June 1, 1942 had fallen

about $5,000,000 short of equalling just compensation for

said services and requesting the Board to reconsider and

increase the rate for the period in question. (11-108)

sa |

4

The Board declined to consider on its merits the question

whether Capital had received, or was entitled to, just com-

pensation for its services rendered since June 1, 1942, and

held that it had no power to reconsider or adjust the rate

fixed by the order of December 16, 1942. Accordingly, the

Board dismissed Capital’s petition, one Board member

dissenting. (134-180)

On petition for review, the action of the Board was af.

firmed by the Court of Appeals for the District of Colum-

bia Circuit on December 6, 1948. (171 F. (2d) 339; 181).

JURISDICTIONAL STATEMENT

This Court has jurisdiction to review the judgment and

decree of the United States Court of Appeals for the Dis-

trict of Columbia Circuit by virtue of the following stat-

utory provisions: 28 U.S. C. § 1254 (see Pub. L. 773, 80th

Cong., 2nd Sess. ch. 646), and § 1006 (f) of the Civil Aero-

nauties Act of 1938 (52 Stat. 1024; 49 U.S. C. § 646 (f)).

THE QUESTIONS PRESENTED

1. Is Capital entitled, under the Fifth Amendment to the

Constitution of the United States, to be paid just compen-

sation for the services it was compelled to render to the

United States by the Civil Aeronautics Act?

Despite the fact that the affirmative answer to this

question is elementary and basic under our system of

Government, the effect of the decision below is to deny

it. It is admitted for the purposes of this case that the

mail rate in effect on and prior to January 14, 1947

failed by millions of dollars to provide just compensa-

tion for the services rendered. Yet the Court of Ap-

peals held that the Constitutional obligation is fulfilled

by a statute which, as interpreted by it, ‘‘embodies a

scheme of just compensation’’ (by providing a deter-

mination of what is thought to be just compensation in

advance of performance rather than after perform-

ance) notwithstanding that the ‘‘scheme’’ fails to pro-

1 a

5

vide just compensation in fact. Any ‘‘scheme’’ which

irrevocably substitutes false prophecy for fact is a

mockery of the obligation to pay just compensation.

2. Was it the intent of Congress, as expressed in the Act,

to delegate to the Board the power to discharge the whole

Constitutional duty of awarding just compensation by fix-

ing the mail rate from time to time and determining the

date from which such rate should be effective?

To sustain the Constitutional validity of the Act it

is necessary that just compensation in fact be recover-

able by Petitioner either from the Board or in the

Court of Claims. Just compensation for the past ser-

vices is a constitutional right no less than it is for the

future. Since the compensatory statute here involved

is broader in scope than the Railway Mail Pay Act of

1916, the obvious and manifest intent of Congress to

refer all the rights of the carriers for settlement to the

Board is even more apparent than this Court found

in the previous Act. United States v. New York Cen-

tral R. Co., 279 U. S. 73 (1929). No more reason can

have existed in the present instance for leaving the

satisfaction of those rights to an action in the Court

of Claims rather than in the jurisdiction of the body

specially qualified to measure the rights.

3. Where the Board has fixed a mail rate for a future

period, based upon predicted facts, and such future period

has passed so that the actual facts can be ascertained, which

show that the rate so fixed has failed to yield just compen-

sation, does the Board have the power under the Act to

reconsider and adjust the rate for the past services to the

extent required to provide just compensation?

The failure of the Board and of the Court below to

answer this question in the affirmative resulted from

the application of concepts properly applicable to the

fixing of rates as between public utilities and their cus-

a

tomers. Here, however, we are dealing with the pay-

ment of just compensation for compelled services.

Concepts applicable to other public utilities have no

proper application here. The services of public utili-

ties are not compelled and the Constitution does not

guarantee them rates which afford just compensation.

Public utility rate regulation, as recently recognized

by this Court in the Hope case, is an exercise of the

police power, a species of price fixing, involving ‘‘a

balancing of the investor and the consumer interests”,

Federal Power Comm. v. Hope Nat. Gas. Co., 320 U.S.

591. The Fifth Amendment does not enter into the

picture until the rates are attempted to be fixed so low

as to confiscate the property of the .:ivestors or accord-

ing to the Courts, so low as to deprive the investors of

the opportunity to earn a reasonable rate of return.

In the case of compelled services, fundamentally in-

volving the power of eminent domain, the Fifth

Amendment operates from the beginning. The differ-

ence between rate regulation cases and just compen-

sation cases is fundamental.

6

4. If the power to reconsider and increase a mail rate

for a past period does not exist in every case when the

actual facts disclose that the rate has failed to provide just

compensation, does not the Board have such power at all

events in this particular case in which ihe order fixing the

rate expressly provided that it was subject to reconsidera-

tion and review from and after its effective date?

The rate order sought to be moai:fied here expressly

provided that it would be subject to reconsideration

and review from and after June 1, 1942 upon Capital’s

request ‘‘filed pursuant to Rule 8 of the Rules of Prac-

tice’. (4 C. A. B. at 25) Capital contended below

that this provision had the effect of making the rate

tentative or provisional only and therefore subject at

any time to ex post facto modification. Both the Board

a

7

and the Circuit Court of Appeals conceded that the

Board had the power to prescribe such a provisional

rate, but the Board, supported by the Court, held that

the reference to Rule 8 limited the provisional char-

acter of this rate to a period of 15 days after the entry

of the order. The 15-day period was specified by Rule

8, among many other things, as the time within which

petitions for rehearing should be filed by parties to a

proceeding. The Court below, in its opinion, com-

pletely ignored Capital’s argument that such a self-

imposed rule of practice could affect neither the power

of the Board to disregard it when necessary in the

discharge of its constitutional duty nor its duty to do

so, particularly when the rule was only a limitation

on the time within which a party might file a petition

and not a time limitation on the Board’s statutory

power on its own initiative under Section 1005 to sus-

pend or modify its orders in such manner as it shall

deem proper.

REASONS FOR ALLOWANCE OF THE WRIT

1. Questions 1, 2 and 3 above stated are involved in the

case of Transcontinental & Western Air, Inc. v. Civil Aero-

nautics Board, Docket No. 387, in which this Court granted

certiorari on December 6, 1948 and in which counsel for

Petitioner filed a brief as amicus curiae. Should this peti-

tion be denied and this Court thereafter render a decision

in favor of the carrier in Docket No. 387, Petitioner will

be deprived of substantial rights to which it is entitled un-

der the Constitution and Laws of the United States.

9. The Court of Appeals for the District of Columbia

Cireuit has not given proper effect to an applicable deci-

sion of this Court. The decision of this Court in the case

of United States v. New York Central R. Co., 279 U. 8. 73,

if given proper effect, would have required said Court to

hold that the Board had the power to increase Petitioner’s

mail rate for the past period in question.

8

3. Said Cireuit Court of Appeals has decided important

questions of federal law which have not been, but should

be, settled by this Court.

These reasons are discussed in Capital’s attached brief.

Wuererore, your Petitioner prays that a writ of cer-

tiorari issue under the seal of this Court, directed to the

United States Court of Appeals for the District of Colum-

bia Circuit, commanding said Court to certify and send to

this Court a full and complete transcript of the record and

of the proceedings of the said Court of Appeals had in the

case numbered and entitled in its Docket No. 9870 (Octo-

ber Term 1948), Capital Airlines, Inc., Petitioner v. Civil

Aeronautics Board, Respondent, to the end that this cause

may be reviewed and determined by this Court as provided

for by the statutes of the United States; and that the order

of said Court of Appeals be reversed by this Court.

CuarLes H. Murcuison

Attorney for Petitioner,

Capital Airlines, Inc.

Srocxton, Utmer & MurcHison

1016 Ring Building

Washington 6, D. C.

Of Counsel

9

IN THE

Supreme Court of the Anited States

Ocroser Term 1948

No.

Capita Arruines, Inc., Petitioner

against

Crvit Agronautics Boarp, Respondent

BRIEF OF CAPITAL AIRLINES, INC. IN SUPPORT OF

PETITION FOR WRIT OF CERTIORARI

The decision of the court below is reported at 171 F.

(2d) 339 and also appears in the Record before this Court.

(181)

The statement of this Court’s jurisdiction, and the state-

ment of the case, have already been set forth in the attached

petition for writ of certiorari.

SPECIFICATION OF ERRORS

1. The Court of Appeals erred in holding that the power

to make a mail rate effective from a date prior to the in-

stitution of a new mail rate proceeding ‘‘is not needed to

vindicate the Constitutional requirement for just compen-

sation (Fifth Amendment). . .”’.

10

2. The Court of Appeals erred in holding that the right

to just compensation is ‘‘protected by the privilege ac-

corded carriers to apply at any time for higher rates to

compensate for future service to the Government”’.'

3. The Court of Appeals erred in holding that the Board

order of December 16, 1942, fixed a final rather than a tem-

porary mail rate for Capital Airlines.

4. The Court of Appeals erred in holding that Capital’s

right to reconsideration was lost by failure to apply there-

for within fifteen days from the date of the 1942 order.

5. The Court of Appeals erred in holding that the Board

was without power to revise Capital’s rates retroactively.

SUMMARY OF ARGUMENT

Decisions of this Court are at striking variance with the

reasoning of the court below which held that the right to

just compensation is ‘‘protected by the privilege accorded

carriers to apply at any time for higher rates to compen-

sate for future service to the Government.’’ On the con-

trary, just compensation by its very nature is a retrospec-

tive concept. It can only be determined after all the facts

upon which it depends become known. ‘‘A forecast gives

us one rate. A survey gives another. To prefer the fore-

cast to the survey is an arbitrary judgment.’’ West Ohio

Gas Co. v. Public Utilities Comm., 294 U. S. 79. A mail

rate established for the future may turn out to be ‘‘just

compensation’’, but then again, it may turn out to be con-

fiseatory five minutes after it has been established. Des

Moines Gas Co. v. Des Moines, 238 U.S. 153.

Capital’s constitutional right to just compensation in this

ease will not be vindicated unless the Board is ordered to

go back beyond January 14, 1947, the date of Capital’s

petition, and make adequate payment for the services ren-

1 Italics supplied unless otherwise noted. Footnote 1 on page

2 of the attached petition is applicable to this brief.

derec

pay

stand

lic ut

exerc

claim

Ca

paym

Boar

rates

its p

1942

juris

Rules

ll

ered by Capital to the Government. The right to receive

ayment for past services requisitioned by the Government

tands on a different basis from the right of ordinary pub-

¢ utilities to retroactive adjustment of rates fixed in the

xercise of the police power—a right which they have never

laimed.

Capital has never waived its Constitutional right to the

ayment of just compensation for the past services. The

joard frequently makes retroactive adjustments of mail

ates previously fixed under the Act and does not question

ts power to do so. The Board’s Order of December 16,

942 expressly made the rate provisional and reserved

urisdiction to revise it retroactively. Rule 8 of the Board’s

tules of Practice did not deprive it of this jurisdiction.

POINT I

'o discharge the full obligation of the Fifth Amendment

the Board must have the power to raise an existing rate

retroactively

In the pending TWA case the Court of Appeals for the

Jistrict of Columbia affirmed the Board’s decision that

he Board is without power to revise rates retroactively

rior to the date a mail rate case is initiated. The same

ule was applied by the Court of Appeals in Capital’s case

fter the Court had decided that Capital had lost its right

o reconsideration by failure to apply therefor in time. On

he question of the Board’s power to grant retroactive ad-

ustments the 7WA case and Capital’s case are identical.

in the facts they are not similar.

The Court in TWA’s case dealt only with the statutory

ower of the Board under Section 406 (a) of the Act to

nake mail rates effective prior to the date of the institu-

ion of a proceeding. The effect of the Fifth Amend-

nent on the interpretation of the Act was not considered

y the court below. Actually, the Fifth Amendment is

ecisive on the question of the power of the Board to go

12

back into the past in determining just compensation. In

Capital’s case, the Court below lost sight of the Constitu-

tional principle through confusing a mail rate (which is

actually a measure of compensation for requisitioned ser-

vices) with a rate fixed under the police power to be charged

to the public.

The reasoning of the Court below, that the right of air

carriers to just compensation ‘‘is protected by the privi-

lege accorded carriers to apply at any time for higher rates

to compensate for future service to the Government’’, is

patently unsound. The privilege to obtain a new estimate

only of what will be fair under conditions prophesied for

the future simply ignores the quantum meruit for services

already rendered. Yet the quantum meruit for carrying

the mail, which can never be determined except retroac-

tively, is what this Court has said in United States v. Griffin,

303 U. S. 226, is ‘‘the ultimate question’’ to be determined

in a mail pay case. This Court has held more than once

that without the test of experience it could not even tell

in advance whether an ordinary public utility rate is con-

fiscatory. Willcox v. Consolidated Gas Co., 212 U.S. 19;

City of Louisville v. Cumberland T. & T. Co., 225 U.S. 480.

Rate-fixing for the future does not constitute a deter-

mination of just compensation, which is essentially a judi-

cial determination. Rate-fixing for the future is a legisla-

tive process. It may or may not result in just compensa-

tion. In a period of constantly rising costs, no matter how

frequently prospective increases may be granted, there will

always be a period of service for less than just compensa-

tion unless the increases are made retroactive.

Where services are rendered to the Government under

compulsion, just compensation must be provided for in or-

der to save the constitutionality of the statute. Since the

Civil Aeronautics Act, on its face, makes the Board the sole

agency to compensate the carriers for their services to the

Government, the Constitution requires the Act to be con-

strued in a way which will provide the just compensation

which the Board in this case has denied.

13

In Umted States v. New York Central R. Co., 279 U. S. 73

(1929), the Government conceded (and this Court held)

that since the services of the railroads were required, the

ebligation to pay just compensation was a constitutional

right. This right included payment for past services as

well as future. This Court further held that, since the In-

terstate Commerce Commission was the sole agency to

which the railroads were referred for payment, Congress

necessarily intended to vest the Commission (rather than

the Court of Claims) with power to award for past services

the just compensation which had not theretofore been de-

termined and paid.

No one can seriously contend that, because the Act, when

enacted, required Capital to go through the form of making

an ‘‘application’’ for a certificate of public convenience

and necessity under penalty of destruction of its business

(Capital had been carrying mail many years before the

passage of the Act and obviously wished to continue doing

so), that its submission to the obligations of the certificate

was ‘‘voluntary’’, or that its services were any less com-

pulsory than were those of the railroads in the New York

Central case.

Both the Board and the Court of Appeals below con-

fused mail rates with regulated rates of ordinary public

utilities. Both were misled by the use of the term ‘‘rate’’

as a measure of compensation in the Act. In United States

v. Griffin, 303 U. S. 226, this Court ruled that mail pay is

not a ‘‘rate’’ at all, but a measure of just compensation

for services rendered to the Government:

‘*While the compensation fixed in a railway mail pay

order is ordinarily measured by a rate, the ultimate

question determined by the Commission is . . . the

proper compensation to be paid by the Government to

the Railroad for services and the use of its property—

the quantum meruit for carrying the mail.’’ (303 U.S.

at 237)

In regulating rates charged by public utilities or carriers

to their customers, the State is exercising the police power,

14

primarily to prevent extortion from the public. The Courts

are not concerned with whether or not the rate is sufficient

to provide just compensation for services rendered, but

only with the question whether the rate is confiscatory. In

exercising the power of eminent domain, elements of value

must be considered which may be ignored in rate cases.

The distinction between ascertaining value in a compensa-

tion case and a rate case was pointed out in Omaha v.

Omaha Water Co., 218 U. S. 180. There is a difference be-

tween just compensation and a non-confiscatory rate. ‘‘The

mere fact that a rate is non-confiscatory does not indicate

that it must be deemed to be just and reasonable’’. Banton

v. Belt Line Ry. Corp., 268 U. S. 413. A non-confiscatory

rate may ignore past confiscation, just compensation may

not.

With reference to the police-power regulation of rates,

this Court recently said in the case of Market Street R. Co.

vy. Railroad Comm. of California, 324 U. 8S. 548:

‘‘The due process clause has been applied to prevent

governmental destruction of existing economic values.

It has not and cannot be applied to ensure values or to

restore values that have been lost by the operation of

economic forces’’.'

This principle has no application to a just compensation

statute which directs the Board to fix the compensation at

an amount ‘‘sufficient to insure the performance’’ of the

service and to ‘‘maintain and continue the development”

of the required air transportation. The Government can-

not develop air power for an atomic war by requiring the

performance of a three-fold service (as here) and, there-

after, attempt to compensate for such service by establish-

ing compensation in the form of a rate which turns out to

be far short of ‘‘just compensation’’.

1In Block v. Hirsh, 256 U. S. 135 at 155, this Court held that

under the doctrine of eminent domain ‘‘what is taken is paid for,”’

but under the police power ‘‘property rights may be cut down,

and to that extent taken without pay.”’

15

In the New York Central case this Court found sufficient

compulsion in the Railway Mail Pay Act (Sec. 5, Subd. 33,

39 Stat. 431, 39 U. S. C. 563) to invoke the carriers’ con-

stitutional right to just compensation. That statute pro-

vided for a fine of $1,000.00 a day for refusal to carry the

mails. The Civil Aeronautics Act specifies even more

severe punishment for any carrier failing to furnish the

necessary schedules and services for the Government. In

the recent Alaska Airlines case the Board restated the com-

pulsions imposed upon carriers by the Act and actually

gave the very relief demanded by Capital in this case.

The Board stated:

‘*Certificates of convenience and necessity carry

with them many obligations imposed by law. Section

401(m) requires a carrier certificated for mail service

to carry mail whenever required by the Postmaster

General. Section 404(a) states in part that ‘it shall

be the duty of every air carrier to provide and furnish

interstate and overseas air transportation, as author-

ized by its certificate, upon reasonable request there-

for.’ Section 401(k) forbids the abandonment of any

route without previous approval by the Board, which

approval may be given only upon a finding that aban-

donment is in the public interest. Failure to fulfill

these and many other obligations are not matters to

be compensated for by mere damages. Section 401(h)

provides for suspension or revocation of certificates.

Title [IX imposes serious civil and criminal penalties

.. 2? (Opinion of the Board, Order Serial No. E-1885,

August 13, 1948, p. 3.)

There is no question that Capital was likewise under

compulsion to render multiple services to the Government,

and consequently cannot be denied its constitutional right

to just compensation unless there has been an ‘‘acquies-

cence’’ in the confiscatory rate. The general rule is that

where a carrier is under an obligation to perform the ser-

vice in question, no affirmative form of protest is necessary.

In Chicago & Northwestern R. Co. v. United States, 104

U. S. 680, the railroad continued to perform under its con-

16

tract with the Government to carry the mails even though

Congress had passed a statute reducing the rate provided

for in the contract. Subsequently, the railroad sued the

Government for the difference between the contract rate

and the statutory rate. On the question of waiver, this

Court stated:

‘‘And the performance by the Railroad Company of

the service required by its contract, notwithstanding

the notice of the intended reduction by the Postmaster

General, cannot be construed as a waiver of its rights

or an acquiescence in new proposals; and that whether

it had protested against the erroneous construction of

the law or not; for it had no option. It was bound by

the contract to perform the service and its perform-

ance was demanded. It was not in a position abso-

lutely to refuse to carry the mails for it was bound to

carry them, if offered, on some terms, either pre-

scribed by law or fixed by contract; and it had the right

to do so without prejudice to its lawful claims, leaving

the ultimate right to future and final decision.’’ (104

U. S. at 688)

Capital has never waived its right to additional compen-

sation for the past period. The fact that the previously

fixed rate ‘‘stood unchallenged for three years’’ does not

establish a waiver. In the Alaska Airlines case, supra, the

previous rate stood unchallenged for more than four years,

but the Board did not consider this a waiver of the carrier’s

right. As stated in St. Louis, Brownsville & Mexico R. v.

United States, 268 U.S. 169:

‘¢ . to constitute acquiescence within the meaning

of this rule, something more than acceptance of the

smaller sum without protest must be shown. There

must have been some conduct on the part of the creditor

_akin to abandonment or waiver, or from which an

estoppel might arise. Every case in which this court

has sustained the affirmative defense of acquiescence

rests upon findings which include at least one of these

additional features’’. (268 U.S. at 175)

In the present case, Capital challenged the ability of the

Board to fix a compensatory rate for the future at the time

17

ihe rate was being fixed. The Board expressly conceded its

inability to do so, and fixed the rate provisionally. There

was no duty on Capital to make any further challenge to

avoid an estoppel.

POINT II

The Board’s power to revise its Order of December 16, 1942

was not lost by the elapse of 15 days

In many mail rate cases the Board fixes ‘‘temporary’’

rates which are subject to reconsideration and adjustment

retroactively if, in actual experience, they do not yield just

compensation. The Board did just that in the instant case

for the period subsequent to January 14, 1947, and has

since revised the rate upward in the light of experience.

Essair, Inc., Temporary Mail Rates, 6 C. A. B. 687; Chicago

& Southern Air Lines, Inc., Order No. E-1097; and many

others.

Capital in June, 1942 clearly asked for, and the Board’s

December, 1942 order clearly fixed, a rate for the future

which was of the same provisional and temporary charac-

ter. No other interpretation of the 1942 Order is legitimate.

The Board itself stated that the rate for the period begin-

ning June 1, 1942 was fixed:

** .. im accordance with the specific request of the re-

spondent that the rate to be applied subsequent to June

1, 1942, be made subject to review.’’ (4. A. B. at 44)

The Board further said that the rate would be ‘‘subject to

reconsideration and review from and after that date.’’

(4C. A. B. at 25) The conception that the addition of the

words ‘‘upon respondent’s request, filed pursuant to Rule 8

of the Rules of Practice’’, limited the time for review to an

experience period of 15 days is a mockery of reason.

Even if the Board had intended to false-card Capital out

of its right to file a petition for review of the provisional

rate by inserting this 15-day joker in the pack, this would

18

not affect the Board’s power to reconsider the order in its

discretion. Power to reconsider its own orders is vested

in the Board by Section 1005 (d) of the Act as follows:

‘Except as otherwise provided in this chapter, the

Board is empowered to suspend or modify its orders

upon such notice and in such manner as it shall deem

proper.’’

There is no statutory time limitation placed on the

Board’s power to suspend or modify. Rule 8 was a limita-

tion only on the right of a party to a proceeding to file a

petition for reconsideration, and the Board has waived this

time limit in many, many cases upon request of a party.

The Board has never adopted any rule purporting to limit

the time within which it may act on tts own motion to mod-

ify an order. If it has the power to reconsider and revise

its orders on its own motion, it also has the power to act

when the need for revision is called to its attention by an

unauthorized petition.

In Froeber-Norfleet v. Southern Railway Co., 9 F Supp.

409 (D. C. N. D. Ga.), a reversal on rehearing of a repara-

tion order was involved. The Interstate Commerce Com-

mission first entered an order sustaining the challenged

rates on December 9, 1929. Several petitions for rehearing

were filed and were denied. Finally in August, 1931, an

additional petition for reconsideration, modification and

reopening was filed and on November 3, 1931, the Commis-

sion ordered the proceedings reopened and, thereafter, en-

tered an Order finding the rates unreasonable and award-

ing reparation. Section 16 (6) of the Interstate Commerce

Act, like Section 1005 (d) of the Civil Aeronautics Act, pro-

vides ‘‘the Commission shall be authorized to suspend or

modify its orders upon such notice and in such manner as

it shall deem proper.’? The Commission had adopted its

Rule 15 (e), which provided that a petition for rehearing

a ease relating to reparation must be filed within sixty

days after service of the report.

19

In the Froeber case the court observed that the limitation

of the Rule was upon the filing of a petition by a party

and not upon the Commission itself, and that the Commis-

sion had not imposed any time limit upon itself for the re-

opening and reconsideration of a case. The court then held

that the Commission had the power to reconsider the case

even though the time limit fixed by Rule 15 (e) had expired.

The court said:

‘‘The Commission may properly, under its Rule

15 (e), deny a party the right to file a petition for re-

hearing in a reparation case unless it be presented

within sixty days, but I do not see anything in this Rule

to prevent the Commission, on its own Motion, from

reconsidering and reversing or modifying one of its

Orders, whether the matter be brought to its attention

by a petition which a party could not file as a matter of

right, or in some other way.’’ (9 F. Supp. at 411)

Even if the Board had attempted (which it did not) to

limit the time within which it could, on its own motion,

reconsider and modify its orders, it could not by any such

self-imposed rule, disable itself from performing its statu-

tory duties. In Gage v. Gunther, 136 Cal. 338, 68 Pac. 710,

the pertinent facts are stated by the court as follows:

‘*The proposition chiefly relied upon by them is that

the denial of Secretary Noble, on March 3, 1893, of the

motion to review his decision of August 1, 1892, revers-

ing the decision of the commissioner of the general land

office, was a fina] determination of that question; .. .

and that Secretary Smith had no jurisdiction there-

after to review the same; and in support of this claim

they rely upon certain rules of practice or procedure

formulated by the land department, under which it is

claimed that a re-review of a decision by the secretary

is unauthorized.’’ (136 Cal. at 345)

In holding that no self-imposed rule of practice could limit

the time within which the former decision might be recon-

sidered, the court said:

20

‘‘Neither can the authority of the secretary to review

or set aside the decision be taken away by any rule of

procedure which he may formulate. There is no statu-

tory inhibition against his granting a rehearing or a

review, or the number of times a motion therefor may

be made, or any provision relating to the time within

which a rehearing may be granted, or within which the

former decision may be set aside. Congress has im-

posed this supervisory duty upon him, and he cannot

divest himself of it by any rule of his own creation.”

(136 Cal. at 347)

CONCLUSION

The petition for a writ of certiorari should be granted.

CuarLes H. MurcHison

Attorney for Petitioner,

Capital Airlines, Inc.

Srockton, Umer & MurcHIsoN

1016 Ring Building

Washington 6, D. C.

Of Counsel

Page

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Questions presented .............-- 022 sees eee ee tee eens: 2

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CITATIONS

Cases :

Essair Inc. v. Temporary Mail Rate, 6 C.A.B. 687....... 7

Pennsylvania-Central Airlines Corporation, Mail Rates,

“Ey eS Pee er een Peet eee ee ee 3,4

Transcontinental & Western Air, Inc. v. Civil Aeronau-

tics Board, No. 387, Oct. Term, 1948......... .....-. 2, 6,8

United States v. Pierce Auto Lines, 327 U.S.515........ 8

Statute:

Civil Aeronautics Act of 1938, c. 601, 52 Stat. 973:

Sec. 406 (a), 49 U.S.C. 486(a).................. 9

Sec. 406 (b), 49 U.S.C. 486(b) .........-. «6.0. 10

See. 1006 (a), 49 U.S.C. 646(a) .......... ..----. 5

Miscellaneous :

Civil Aeronautics Board, Rules of Practice, Rule 8, 14

C.F.R. (1939 Supp.) § 285.8..................----.. 4,7,10

Reorganization Plan No. IV (54 Stat. 1235, 5 F. R.

RG certo reer re 9

-

Guthe Supreme Gourt of the Wnited States

OcToBER TERM, 194%

No. 608

CapITaL AIRLINES, INC., PETITIONER

v.

Crvi. AERONAUTICS BOARD

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE DIS-

TRICT OF COLUMBIA CIRCUIT

MEMORANDUM FOR THE CIVIL AERONAUTICS BOARD

OPINIONS BELOW

The opinion of the Court of Appeals for the Dis-

trict of Columbia Circuit (R. 181-182) is reported

at 171 F. 2d 339. The opinion of the Civil Aero-

nautics Board (R. 132-180) is reported at 8 C.A.B.

(No. 52) 685.

JURISDICTION

The judgment of the Court of Appeals was en-

tered on December 6, 1948 (R. 183). The petition

(1)

2

for a writ of certiorari was filed on February 28,

1949. The jurisdiction of this Court is invoked

under 28 U.S.C. 1254.

QUESTIONS PRESENTED

1. Whether the Civil Aeronautics Board has au-

thority, under the Civil Aeronautics Act, to fix a

new mail rate to be effective during a period in

which a final rate previously fixed by the Board

was in effect and unchallenged by the initiation

of a mail-rate proceeding.

2. Whether the Civil Aeronautics Board abused

its discretion or denied petitioner any legal right

in determining that the petitioner’s January 14,

1947, ‘‘Petition for Reconsideration’’ of the

Board’s order of December 16, 1942, initiated a

new rate proceeding rather than serving to reopen

the old proceeding which culminated in the 1942

order.

STATUTE AND REGULATION INVOLVED

Section 406 of the Civil Aeronautics Act and

Rule 8 of the Civil Aeronautics Board’s Rules of

Practice are set out in the Appendix, infra, pp. 9-12.

Other relevant statutory provisions are set out in

the Appendix to the Board’s brief in Transcon-

tinental d&: Western Air, Inc. v. Civil Aeronautics

Board, No. 387, this Term.

STATEMENT

On October 8, 1940, the Board instituted a pro-

ceeding to fix and determine fair and reasonable

3

mail rates for the petitioner (referred to herein-

after as Capital) pursuant to Section 406(a) of

the Civil Aeronautics Act of 1938. After public

hearing, an Examiner issued his report recommend-

ing the establishment of certain mail rates for

Capital (R. 11-12; Pennsylvania-Central Airlines

Corporation, Mail Rates, 4 C.A.B. 22, 23-24 (1942) ).

In May 1942, the armed forces took over a sub-

stantial portion of the planes of the domestic air

carriers, and severe restrictions affecting service

patterns of all carriers, including Capital, were

imposed (R. 137, n. 4; 12, 114, 115, 118). To pro-

tect carriers against undue losses occasioned by

these restrictions, the Board issued two general

memoranda to the industry (R. 137, n. 4). The

first memorandum suggested that all mail rates

fixed after May 31, 1942, be temporary. The second

memorandum expressly withdrew the first and pro-

vided that any carrier which had no rate case pend-

ing could file a petition within two weeks after

June 3, 1942, which petition would be considered

filed as of June 1, 1942. If such a petition were

filed, it was proposed that after sufficient experience

had been accumulated under the new service pat-

tern, a final rate effective as of the petition date,

June 1, 1942, would be fixed. As to those carriers,

like Capital, which had rate cases pending, the

Board would proceed to fix final rates in accordance

with its usual procedure. (R. 114-117, 118-119.)

On June 26, 1942, Capital filed a petition with the