Petition for Writ of Certiorari — Lehman v. Civil Aeronautics Board

Supreme Court brief1954

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195

HAROLD B. WILLEY,

IN THE

Supreme Court of the Gnited States

Ocroser TERM 1953.

ROBERT LEHMAN, JOSEPH A. THOMAS and

FREDERICK L. EHRMAN,

Petitioners,

against

CIVIL AERONAUTICS BOARD,

Respondent,

CONTINENTAL AIR LINES, INC. and

NATIONAL AIRLINES, INC.,

Intervenors.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT.

Wuirtney Nortu Seymour,

Counsel for Petitioners,

120 Broadway,

New York 5, N. Y.

Epwin L. WEIs1L,

Grorce G. GALLANTZ,

James L. Parris,

Stmmpson THACHER & BaRTLETT,

of Counsel.

TABLE OF CONTENTS.

PAGE

Orrnions BELow

JURISDICTION

Questions PRESENTED

Statutes InvoLvep

oOo no DS WH &

STATEMENT

Reasons RELIED ON FoR ALLOWANCE OF THE WBIT........ 13

ARGUMENT:

I—The Board’s order was based upon an

erroneous construction and application of

§409(a) of the Civil Aeronautics Act. In con-

cluding that each Lehman partner ‘‘acts as a

representative’’ of every other Lehman partner,

and in directing the termination of several of

the ‘‘relationships’’ said to have been created

thereby, the Board exceeded the authority dele-

gated to it by Congress 18

II.—There was no substantial evidence of

‘‘consequential’’ competition between Pan-

American and United Fruit and therefore no

basis for depriving either of those companies

of the benefits of the services of one of its

directors 22

APPENDIX 25

TABLE OF AUTHORITIES.

Court Decisions.

PAGE

Addison v. Holly Hill Co., 322 U. S. 607 (1944)...... 14

Gilman v. Jack, Me. , 91 A. 2d 207 (1952) 21

National Labor Relations Board v. Universal

Camera Corp., 190 F. 2d 429 (C. A. 2, 1951)...... 16

Rattner v. Lehman, 193 F. 2d 564 (C. A. 2, 1952)-..... 22

Universal Camera Corp. v. National Labor Rela-

tions Board, 340 U. S. 474 (1951) 16

Western Union v. Lenroot, 323 U. S. 490 (1945)... 20

Srarurss.

Administrative Procedure Act of 1946 (Act of June

11, 1946, c. 324, 60 Stat. 237),

Section 10(e); 5 U. S. Code §1009(e).......... 2, 16, 26

Banking Act of 1933 (Act of June 16, 1933, c. 89, 48

Stat. 162),

Section 32; 12 U. S. Code $78 9, 21

Civil Aeronautics Act of 1938 (Act of June 23, 1938,

ec. 601, 52 Stat. 973),

Section 2; 49 U. S. Code §402

Section 409(a); 49 U. S. Code §489(a)_..... 2,3,

5, 6, 7, 9, 10, 13, 18, 19, 20, 21, 22,

Public Utility Holding Company Act of 1935 (Act

of August 26, 1935, c. 687, 49 Stat. 803),

Section 2(a)(11)(D); 15 U. S. Code §79b(a)

(11)(D)

Section 17(c) ; 15 U. S. Code §79q(c)-................. 9, 20, 21

Securities and Exchange Act of 1934 (Act of June 6,

1934, c. 404, 48 Stat. 881),

Section 16(b); 15 U. 8. Code §78p(b)......-.. 22

MIscELLANEOUS.

89 Cong. Rec. 8607 (1943)

Hearings before House Committee on Interstate and

Foreign Commerce on H. R. 9738, 75th Cong., 3rd

Sess. (1938)

House Report No. 784, 78th Cong., 1st Sess. (1943)

H. R. 3420, 78th Cong., Ist Sess. (1943).....................

S. 3845, 75th Cong., 3rd Sess. (1938), section 410......

Webster’s New International Dictionary, 2d Ed.

1951

PAGE

IN THE

Supreme Court of the Anited States

Octosper Term 1953.

Rosert LenMaN, Josep A. THomas and

Freperick L. ExRMan,

Petitioners,

against

Crvm Arronavtics Boarp,

Respondent,

ConTINENTAL Arr Lings, Inc. and Nationau Armuiyzs, Inc.,

Intervenors.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT.

Your petitioners respectfully pray that a writ of cer-

tiorari be issued to review the judgment of the United States

Court of Appeals for the District of Columbia Circuit

entered on August 6, 1953 (R. 609). A majority of the

Court of Appeals affirmed an order of the Civil Aeronautics

Board entered on May 21, 1952 (R. 24, 603).

Opinions Below.

The majority opinion of the Court of Appeals by Judge

Fany (R. 592) and the dissenting opinion of Judge Prerry-

MAN (R. 604) have not yet been reported.

The findings and opinion of the Civil Aeronautics Board

(R. 122) have not yet been reported.

Jurisdiction.

The judgment of the Court of Appeals was entered on

August 6, 1953 (R. 609). The jurisdiction of this Court

is invoked under 28 U. S. Code §1254.

Questions Presented.

1. Whether under Section 409(a) of the Civil Aero-

nautics Act of 1938 the Civil Aeronautics Board was

authorized to conclude that a partner of an investment

banking firm who is a director of an air carrier has a

representative ‘‘who represents such * * * director as * * *

a director’’ in a common carrier or aeronautical company,

if another partner of the same investment banking firm is

quite independently a director of a different common carrier

or aeronautical company, merely because such directors

oceasionally seek to secure financing business for the invest-

ment banking firm from the companies of which they are

directors.

2. Whether the Board could reasonably find that the

public interest is adversely affected within the meaning

of said §409(a) when a person holds concurrent director-

ships in two companies, one of which, as a minor incident

to its tropical produce business, supplies slow vacation

steamship cruises, and the other of which supplies rapid

air transportation and derives a small fraction of its gross

revenue from the area served by the produce company.

Statutes Involved.

The statutes involved are Section 409(a) of the Civil

Aeronautics Act of 1938 and Section 10(e) of the Adminis-

trative Procedure Act of 1946, set forth in the Appendix

hereto. For convenience, the first three subdivisions of

§409(a) are also set forth here:

“*Sec. 409(a). After one hundred and eighty days

after the effective date of this section, it shall be

unlawful, unless such relationship shall have been

approved by order of the Board upon due showing,

in the form and manner prescribed by the Board,

that the public interest will not be adversely affected

thereby—

(1) For any air carrier to have and retain an

officer or director who is an officer, director, or mem-

ber, or who as a stockholder holds a controlling

interest, in any other person who is a common car-

rier or is engaged in any phase of aeronautics.

(2) For any air carrier, knowingly and willfully,

to have and retain an officer or director who has a

representative or nominee who represents such offi-

cer or director as an officer, director, or member, or

as a stockholder holding a controlling interest, in any

other person who is a common carrier or is engaged

in any phase of aeronautics.

(3) For any person who is an officer or director

of an air carrier to hold the position of officer, direc-

tor, or member, or to be a stockholder holding a con-

trolling interest, or to have a representative or

nominee who represents such person as an officer,

director, or member, or as a stockholder holding a

controlling interest, in any other person who is a

common carrier or is engaged in any phase of aero-

nautics.’’

Statement.

The two questions presented by this petition arise out

of two separate proceedings instituted before the Civil

Aeronautics Board and subsequently consolidated by it.

Each question arises out of a different state of facts and

—E eet a i

was treated separately by the Board, in the briefs filed in

the Court below, and in both the majority and minority

opinions below. Each will also be treated separately here.

Under the provisions of §409(a)(2) and (3) of the

Civil Aeronautics Act of 1938, it is unlawful for an air

carrier knowingly and wilfully to have a director who has,

or for any director of an air carrier to have, a representa-

tive who represents him in a company which is a common

carrier or is engaged im any phase of aeronautics, unless

the Civil Aeronautics Board approves upon a showing that

the public interest will not be adversely affected.

Petitioner Lehman is a director of Pan American World

Airways, Inc.; petitioner Thomas is a director of National

Airlines, Inc.; and petitioner Ehrman is a director of

Continental Air Lines, Inc. These three companies are

all air carriers. In addition petitioner Thomas is a director

of American Export Lines, Inc., a common carrier and

Mr. John D. Hertz is a director of Consolidated Vultee

Aircraft Corporation, a company engaged in a phase of

aeronautics. Petitioners Lehman, Thomas and Ehrman,

and Mr. Hertz are also members of Lehman Brothers, a

partnership which conducts an investment banking business

(R. 83-85).

On December 30, 1948 the Civil Aeronautics Board

instituted a proceeding to determine whether petitioners

Lehman, Thomas and Ehrman had ‘‘representatives or

nominees’’ who were holding positions as officers or direc-

tors of other companies within the scope of 4§409(a)

of the Act. After hearing, the Board held that an individual

Lehman Brothers partner who is a director of a §409(a)

company is as such a representative of another partner

who is a director of another such company (R. 123-125).

The novel question of law thus decided by the Board

is summarized in the opinion of the court below as follows:

‘‘More precisely the Board concluded that a Lehman

Brothers partner who is director of an air carrier has a rep-

resentative ‘who represents such * * * director as * * * a

director’ in another Section 409(a) company if another

Lehman Brothers partner is a director of the latter, coupled

with the circumstances that he seeks on behalf of Lehman

Brothers the security underwriting and merger negotia-

tion services used by the company of which he is a direc-

tor’’ (R. 598).

Upon the basis of such reasoning the Board found an

unlawful interlocking relationship between Pan American

and National; Pan American and American Export; Pan

American and Consolidated Vultee; National and Pan

American; National and Consolidated Vultee; and Con-

tinental and Consolidated Vultee (R. 134). On such prem-

ises it deprived those companies of the services of qualified

directors chosen by the stockholders of the companies.

Likewise, it deprived the directors of an opportunity to

serve companies in which they had long been interested.

There was no finding by the Board that any additional

special circumstances justified a conclusion of ‘‘representa-

tion’’ within the meaning of the statute. On the contrary,

the Board adopted findings by its examiner (R. 125): that

the partners involved in the proceeding had not been

appointed directors as ‘‘representatives of the firm’’ of

Lehman Brothers (R. 87); that there was no evidence that

these directors were appointed ‘‘for the purpose of serving

as representatives or nominees’’ of each other (R. 86-87),

but there was evidence that each of the Lehman partners

was named a director as a result of a personal interest in the

company or because of personal relationships with the

management of such company (R. 86) ; that in each instance

_— es mW dan cee BA a ae Te ee ia So

these partners hoid or have held substantial stock interests,

but not nearly controlling interests, in the respective com-

panies (R. 86-88); that the petitioners when acting as

directors exercise ‘‘independent judgment”’ and ‘‘individual

action’’ (R. 88-89); that such independence was apparent

from the fact that two of the petitioners had taken ‘‘dia-

metrically opposed views and action’’ on important matters

affecting their respective companies (R. 88); that the

record was ‘‘devoid of any indication that Lehman direc-

tors have used the partnership relations to the detriment

of companies of which they are directors’’ (R. 93); that

there was no evidence that any ‘‘Lehman partner exer-

cises any control over other partners who are directors”’

of any of these companies (R. 87); and that it did not

appear that any of the petitioners ‘‘acted [as directors]

on instructions of other partners’’ (R. 91-92).

For its conclusion that, in spite of these facts, each

petitioner had ‘‘a representative as a director’’ in a §409(a)

company, the Board relied on testimony by the partners

themselves that in the event a company of which one was

a director proposed financing ‘‘he would endeavor to secure

the underwriting business for Lehman Brothers so long as

the firm could do as good a job as any other banking firm’’

(R. 89); and that in some instances Lehman Brothers had

received fees for participating in merger negotiations con-

ducted by §409(a) companies of which Lehman partners

were directors (R. 90).

That this was the only circumstance upon which the

Board relied for its holding against the petitioners is evi-

denced by the following summary made by the examiner

(R. 91) and approved by the Board (R. 125):

‘Tt is not implied that every act which a Lehman

partner does as director of an enterprise is on behalf

of the firm or its partners. The representation is

PAAR NRL —

limitedly solely to such action as a partner may take

in securing business for the firm and it is the only

instance established by the record in this proceeding

in which the Lehman partner represents the firm on

the board of directors of a company.’’

The majority opinion below

as to the first question presented.

The Court of Appeals for the District of Columbia

affirmed, Judge Prettyman dissenting. In its opinion (per

Judge Fany with the concurrence of Judge Baze.on), it

held that community of interest due to membership in a

partnership is not in and of itself a proper basis for a

holding that partner-directors are ‘‘representatives’”’ of

each other within the meaning of §409(a); that it was not

the intent of Congress to regulate all interlocking relation- |

ships between an aeronautical company and an investment

banker. However, it concluded that because underwriting J

and merger negotiation activities are a substantial part

of the business of Lehman Brothers, because profits from

fees are shared by partners of that firm, and because aero-

nautical companies such as those involved in this case need

and use underwriting and merger negotiation services, the

partner-directors could not seek such business for the part-

nership without acting as its representatives and therefore

as representatives of each other. ‘‘For the situation comes

to more than mere community of interest and some sharing

of common benefits as partners’’ (R. 599-600).

The court recognized that there were valid arguments

to the contrary but thought they were not sufficiently cogent

to lead to a reversal. Among these arguments it cited

legislative history ‘‘indicating that the provisions in ques-

tion were designed to prohibit an officer or director of an

air carrier from ‘employing’ a representative as director

saisiameninis

in another air carrier, common carrier or aeronautical

company, so as to prevent evasions’’ (R. 601).

The court also noted the record evidence ‘‘that Lehman

Brothers’ partners who are directors of the regulated com-

panies have acted on occasion quite independently and at

variance with the views of each other.’’ But it held that

there had been representation ‘‘in important respects’’

and therefore the statute applied (R. 602).

Petitioners had argued below that the ordinary mean-

ing of the word ‘‘representative’’ was the dictionary defi-

nition, i.e., ‘‘One who represents others or another in a

special capacity; an agent, deputy or a substitute; * * *’’

/ (Webster’s New International Dictionary, 2d ed., 1951, p.

2114), and that upon the basis of the plain language of

the statute, a contrast of it with other Acts of Congress,

and such judicial authority and legislative history as were

available, a director could not be a representative of some

other company’s director unless he was in some way or to

some extent a deputy of, or under the control of, or answer-

able to, such other person for his acts as a director.

The court recognized this definition as a permissible

one but rejected it in this case because it gave the statutory

word ‘‘a narrow meaning inconsistent with the purpose

to keep the vital aeronautical industry, in its component

parts, independent and competitive to the extent necessary

to insure sound development in accordance with the needs

of the foreign and domestic commerce of the United States,

the postal services and the national defense’’, citing 42

of the Civil Aeronautics Act of 1938 (R. 602).

The dissenting opinion below

as to the first question presented.

Judge Prettyman concluded that the fact, that Lehman

Brothers upon occasion is awarded underwriting business

and participates in merger negotiations on behalf of the air

carriers involved, does not make one partner-director the

representative or nominee of another who is a director of

a different company, within the meaning of the statute. He

thought this view justified by ‘‘the plain language of the

statute’’ (R. 605).

He recognized that ‘‘the presence of two partners on

two boards of directors is the sort of interlocking relation-

ship which Congress might have declared unlawful unless

approved by the Board.’’ He noted that in ‘other

statutes* Congress had done just that’’ (R. 606).

Since he found no ambiguity in §409(a), he saw no need

to look behind it to find some other legislative purpose and

thus

‘‘to stretch perfectly plain language so as to cover a

situation which the judges may feel was within the

general scope of the purpose which Congress must

have had in mind. To be specific, when Congress

prohibits one definite sort of interlocking relation-

ship, the courts cannot say that the purpose of Con-

gress was to prohibit interlocking relationships and

that therefore any variety of such relationship falls

within the ban. The courts ought to apply a statute

the way Congress wrote it, so long as they can ascer-

tain from the language used the meaning of the

statute. Beyond that the content of the statute is a

matter for Congress, and if the statute as written

does not cover a situation deemed by the administra-

tive officials to be adverse to the public interest, the

problem ought to be presented to Congress. In short,

it seems to me in the present case that Congress

* Citing Public Utility Holding Company Act, §17(e), 15 U. 8.

Code §79q(c) ; and Banking Act of 1933, §32, 12 U. S. Code §78.

Those statutes respectively expressly prohibit bank directors from

becoming directors of registered holding companies and investment

bankers from becoming directors of Federal Reserve member banks,

unless appropriate board approval is first obtained. The contrast

with the present statute strongly supports the claim, upheld by

Judge Prettyman, that the Board here has stretched the statute

beyond Congressional expression of intent.

PR ee cNoe RRO me oe oe {ARAM SRE a A NN

might have written something different from what it

did write. But it did not do so, and we ought to

apply the plain terms of the written provision. Only

under the most strained interpretation can Mr.

Thomas be said to be a representative or nominee of

Mr. Lehman on the board of National. In the ordi-

nary meaning of the words ‘representative or nomi-

nee’ he simply was not. The same applies to Mr.

Lehman as a representative or nominee of Mr.

Thomas on the board of Pan American’’ (R. 607-608).

Judge Prettyman concluded his opinion by citing the

legislative history of §409(a) in support of his view and

holding that the target of the statute was ‘‘vicarious

directorial service’’, i.c. the employment of a representa-

tive to evade ‘‘the direct prohibition against the same

person holding office in two air carriers’’ (R. 608). We

submit that Judge Prettyman’s opinion clearly represents

the only permissible view of the Congressional mandate.

The second question presented arises out of the fact

that petitioner Lehman, in addition to his membership on

the board of Pan American, is also a member of the board

of United Fruit Company, a common carrier. Both Mr.

Lehman and Pan American applied to the Board for

approval of this concededly interlocking relationship and,

at the hearing before the Board’s examiner, sought to show

that this concurrent holding of the two directorships does

not adversely affect the public interest. The Board dis-

approved, although it recognized the benefits accruing from

Mr. Lehman’s service as a director (R. 25, 106). In their

petition for review filed in the court below, petitioners

unsuccessfully contended that they were entitled as matter

of law to an order approving the relationship (R. 6).

United Fruit is engaged in the fruit business, prin-

cipally importing from Central and South American

countries (R. 99). On some of its boats it has accommoda-

tions for a comparatively few passengers (R. 100). They

make leisurely ocean voyages, measured in days or weeks,

between New York or New Orleans and Caribbean ports

(R. 403, 405). That service attracts people who want a

slow sea trip (R. 307). Pan American is an airline com-

pany, which provides world-wide foreign and overseas air

service (R. 98). It makes flights to Central American cities,

largely originating in New York, New Orleans and

Miami, which are measured in hours. It attracts people who

want to get to these destinations, and get there fast (R. 101-

102, 106-107, 307). For example, Pan American takes pas-

sengers from Miami to Guatemala in five hours; United

Fruit’s cruises require either eleven or eighteen days (R.

142, 403, 405).

The majority opinion below

as to the second question presented.

In affirming the Board on this aspect of the case, the

court below held that the general geographical area tra-

versed by Pan American and United Fruit ‘‘is largely the

same; and each carrier offers its own type of service in

the effort to obtain the custom. Competition exists between

types of vacationing in, and in travelling to and fro, the

same area, and therefore between the carriers which seek

the traffic. The prospective travelers cannot be isolated

into two groups, the members of each of which must be

assumed to have determined the kind of transportation they

would use, or the kind of vacation they will choose, without

considering an available alternative’’. Although the court

acknowledged that the percentage of tourist traffic to the

total carried by United Fruit was small, it concluded that

this tourist traffic was nevertheless ‘‘consequential’’ and

an integral part of the whole (R. 596).

The dissenting opinion below

as to the second question presented.

The provision of the Board’s order denying the Lehman-

Pan American application was also the subject of Judge

Prettyman’s dissent. He summarized his view on this

aspect of the case in the following language (R. 604):

“To say that the competition between these two

could create a conflict of interest which might produce

results not in the public interest is without support

in the facts, in my judgment. Of course there is a

sort of competition between them, just as in some

senses there is competition between all merchants of

goods or services. But the totally different services

proffered by these two companies make it wholly

unrealistic to say that the public interest would be

affected adversely by the presence of the same man

on the two boards of directors. The theory of the

statute is that a director of a common carrier would,

in many cases, tend to stifle the development of a

competing air carrier. Nothing in this record, as

I see it, indicates that United Fruit might tend to

obstruct Pan American because of the fact that one

operates on and the other above the Gulf and the

Caribbean Sea. The respective businesses are simply

different sorts of business.’’

The Board could not, in reason, reach the result sus-

tained by the majority below. |

Reasons Relied on for Allowance of the Writ.

I. The first question presented by the present petition

is an important one in the administration of the Civil Aero-

nautics Act of 1938. It has not been and should be settled

by this Court. The Board itself recognized the novelty of

the question when it announced in its opinion (R. 125):

‘‘This is the first proceeding under Section 409(a)

of the Act which has presented the jurisdictional

question of the existence of an interlocking relation-

ship by representation rather than by the same

individual having positions in both enterprises.”’

The broad sweep of the Board’s order and of the judg-

ment below as a precedent in future cases is but too

apparent. The Board’s correct characterization of the

question as a ‘‘jurisdictional’’ one indicates that if the

judgment of the Court of Appeals Were left undisturbed,

the Board would consider itself free to go at large and

extend the application of the term ‘‘representative’’ to

every situation in which two or more partners of a non-

aeronautical firm hold membership on boards of aero-

nautical companies. In this case, the result has alre

been to deprive stockholders of the services of qualified and

impeccable directors for their companies, and directors of

the opportunity to serve companies with which they have

had long personal associations. :

Whatever might have been said for the Board’s policy

had it been enunciated by Congress, it is clear that no such

policy is stated in §409(a). No judicial authority whatever

and no specific authority of any kind was cited either by

the Board or the court below for such an expansion of the

Board’s powers; the court having contented itself merely

with a statement of its view that its construction of the

statute was consistent with the Congressional purpose to

foster the needs of foreign and domestic commerce, the

postal service, and the national defense. The court

expressly declined to be guided by what Judge Prettyman

thought was the only cogent legislative history available.

The reason given by the court for disregarding this other-

wise traditional aid in ascertaining the legislative purpose

was that its employment here would lead to too narrow a

construction of the statute (R. 601-602).

In this respect the court’s reasoning was substantially

in conflict with, and Judge Prettyman’s dissent was in

accordance with, the principle laid down by this Court in

Addison v. Holly Hill Co., 322 U. 8. 607 (1944). There the

administrative agency, the Wage and Hour Administrator,

was authorized to define ‘‘area of production’’ and did so

in terms of the size of a producing plant rather than in

terms of geographical area. There, as here, Congress had

shown in other contexts its ability to devise language con-

ferring on the agency broader power than was in fact con-

ferred by the express language of the statute. There, as

here, the only available legislative history, though

‘‘meagre’’, was consistent with the ordinary meaning of

the statutory words and with a narrower grant of power

to the administrative agency.

Mr. Justice Franxrurter, writing for the Court, stated

the principle in the following terms (at pp. 617-618) :

‘*We should of course be faithful to the meaning

of a statute. But after all Congress expresses its

meaning by words. If legislative policy is couched

in vague language, easily susceptible of one meaning

as well as another in the common speech of men, we

should not stifle a policy by a pedantic or grudging

process of construction. To let general words draw

nourishment from their purpose is one thing. To

draw on some unexpressed spirit outside the bounds

of the normal meaning of words is quite another.

For we are here not dealing with the broad terms

of the Constitution ‘as a continuing instrument of

government’ but with part of a legislative code

‘subject to continuous revision with the changing

course of events.’ United States v. Classic, 313 U.S.

299, 316.

Legislation introducing a new system is at

best empirical, and not infrequently administration

reveals gaps or inadequacies of one sort or another

that may call for amendatory legislation. But it is

no warrant for extending a statute that experience

may disclose that it should have been made more

comprehensive. ‘The natural meaning of words can-

not be displaced by reference to difficulties in admin-

istration.’ Commonwealth v. Grunseit (1943) 67

C. L. R. 58, 80. For the ultimate question is what

has Congress commanded, when it has given no clue

to its intentions except familiar English words and

no hint by the draftsmen of the words that they

meant to use them in any but an ordinary sense. The

idea which is now sought to be read into the grant by

Congress to the Administrator to define ‘the area

of production’ beyond the plain geographic implica-

tions of that phrase is not so complicated nor is

English speech so poor that words were not easily

available to express the idea or at least to suggest it.

After all, legislation when not expressed in technical

terms is addressed to the common run of men and is

therefore to be understood according to the sense of

the thing, as the ordinary man has a right to rely

on ordinary words addressed to him.’’

II. The second question presented is also an important

one involving Federal law and affects generally and

broadly the frequently-invoked judicial power to review

orders of administrative agencies under §10(e) of the

Administrative Procedure Act of 1946. The decision below

appears to be in conflict with the principle recently

announced by this Court in Universal Camera Corp. v.

National Labor Relations Board, 340 U. S. 474 (1951).

There the Court had occasion to consider the ‘‘substan-

tial evidence’’ test of the Administrative Procedure Act,

which was also applied by the court below in this case.

This Court noted that while the new statutory reformula-.

tion of this test had done no more than incorporate what

had already been the better practice, Congress had clearly

directed that the Federal courts ‘‘must now assume more

responsibility for the reasonableness and fairness of * * *

Board decisions that some courts have shown in the past’’;

and that a board’s findings must be set aside when not

justified ‘‘by a fair estimate’’ of the testimony or the

board’s ‘‘informed judgment on matters within its special

competence’’ or both (340 U. S. at p. 490). The Universal

Camera case was remanded to the Court of Appeals for

the Second Circuit for reconsideration in the light of the

standards this Court had enunciated. Upon remand, the

Court of Appeals, through Chief Judge Learned Hand,

summarized the basic principle as follows (National Labor

Relations Board v. Universal Camera Corp., 190 F. 2d 429,

430 [1951]):

sc# * * not only were they [Courts of Appeals] to

look to the record as a whole, but they were to be

less ready to yield their personal judgment on the

facts; at least less ready than many at times had

been. Presumably that does not extend to those

issues on which the Board’s specialized experience

equips it with major premises inaccessible to judges,

but as to matters of common knowledge we are to use

a somewhat stiffer standard. Just where the Board’s

specialized experience ends it may no doubt be hard

to say; but we are to find the boundary and beyond

it to deem ourselves as competent as the Board to

pass upon issues of fact. * * *’?

Failure to reverse the Board’s decision on the second.

question here was obviously based on exaggerated deference

for expert judgment where no question involving esoteric

knowledge was actually involved. Had the standards laid

down by this Court and stated by Judge Hand been applied

to this case, it would have been found, as Judge Prettyman

found, that the judgment of the e Board as to the degree of

present and future competition between Pan American and

United Fruit had net been based ialized experi-

fnce”’. The advantages and ie seer of vacations at

sea and of vacations elsewhere are not ‘‘issues on which

the Board’s specialized experience equips it with major

premises inaccessible to judges’. On the contrary, they

are issues ‘‘as to matters of common knowledge’’ to which

the court below should have applied ‘‘a somewhat stiffer

standard’’. The Board’s treatment of this subject (R. 106-

107) did not indicate that it had decided this issue on the

basis of any expertness beyond that to be found in common

knowledge. To continue borrowing from the language of /

Chief Judge Hand, the court below should have deemed

itself ‘‘as competent as the Board’’ to pass upon these

issues.

Its declination to do so led to a decision in conflict with

an important principle laid down by this Court, and it is, we

submit, essential to the proper judicial administration of

the Administrative Procedure Act that this decision be

reviewed and reversed.

— i a tn Teas SPEER IIR L a Rak Toa ce ete SAAT ME OES oR RS Ng

ARGUMENT.

The Board’s order was based upon an erroneous

construction and application of §409(a) of the Civil

Aeronautics Act. in concluding that each Lehman

partner “acts as a representative” of every other

Lehman partner, and in directing the termination of

several of the “relationships” said to have been created

thereby, the Board exceeded the authority delegated

to it by Congress.

The statute on its face is designed only to prevent

familiar interlocking directorships under certain circum-

stances between specified kinds of companies. The provi-

sion here in question is designed to prevent evasion by the

use of representatives or nominees who would be subject to

some form of control, at least temporarily, by their

principals.

In applying §409(a) to members of the Lehman partner-

ship the Board purported to give the term ‘‘representa-

tive’’ its ordinary meaning but actually gave it an exotic

connotation and ignored the dictionary definition of the

term, supra (p. 8), and the meaning of the term in its

context. Both the Board and the court below also dis-

regarded the plan and purpose of the statute which are

evident from its face, i.e., that the ‘‘representative or

nominee’’ provision was intended only to prevent evasion

of the direct prohibition against the same person holding

office in two air carriers (§409[a][1]). The statute was

not designed to reach out to embrace persons not bound in

some manner either in law or in fact to carry out the instruc-

tions of directors of other companies.

The available legislative history supports the conclusion

that the language of the statute was directed against those

who would hold office vicariously in one of the specified

kinds of companies. This legislative history was cited but

not followed by the majority of the court below. In the

language of the court, ‘‘there was testimony before the

House Committee on Interstate and Foreign Commerce,

Hearings before House Committee on Interstate and For-

eign Commerce, H. R. 9738, 75th Cong., 3d Sess. 45 (1938),

by the Assistant General Counsel of the Treasury who

assisted in drafting the bill indicating that the provisions

in question were designed to prohibit an officer or director

of an air carrier from ‘employing’ a representative as

director in another air carrier, common carrier or aero-

nautical company, so as to prevent evasions”’ (R. 601-602).

Further support for this reading of the ‘‘representative”’

clause is found in the fact that §410 of 8S. 3845, 75th Cong.,

3rd Sess., a forerunner of the statute now under considera-

tion, contained, in addition to the words ‘‘a representative

or nominee’’, the words ‘‘or otherwise’’. These latter two

words were omitted in the final enactment (R. 607-608).

The only effort ever made in Congress to extend the

applicability of the statute to a case such as this, failed

of adoption. In 1943, H. R. 3420, to amend the Civil Aero-

nautics Act of 1938, was reported out of the Committee on

Interstate and Foreign Commerce. Section 409(a)(B) of

this bill made it unlawful ‘‘for any air carrier to have and

retain an officer or director who is an officer, director, or

member of, or who controls, any other person— * * * (B)

who is an underwriter * * *.’’ The bill also made it unlaw-

ful for a director of an air carrier ‘‘to hold the position

of officer, director, or member’ of any person who is an

underwriter. Commenting on this section of the bill, the

House Report states: ‘‘The principal change of substance

. AMOR EOE PEE NII I ERSTE ADENINE ES MS IRE Dt A ose

is the inclusion within the scope of section 409 of interlock-

ing relationships between * * * air carriers and under-

writers.’’ House Report No. 784, 78th Cong., 1st Sess. 27

(1943). The bill was committed to the Committee of the

Whole House on the State of the Union and ordered to be

printed, 89 Cong. Rec. 8607 (1943), and there its history

ends. Thus, in spite of the fact that, at east in this negative

way, Congress has indicated its unwillingness to include

an ‘‘underwriter’’ among the specified kinds of companies

affected by §409(a), the Board and the court in this case

have extended the legislation to include in effect inter,

locking directorates between air carriers and underwriters.*

Reference to other statutes in part materia demonstrate

that when Congress wished to go further than it did in

§409(a), it has had no difficulty in expressing its intent to

do so. The language in §409(a) is to be contrasted with the

language in:

Section 2(a)(11)(D) of the Public Utility Holding Com-

pany Act of 1935 (15 U. S. Code §79b [a] [11] [D])

where Congress gave the Securities and Exchange Commis-

sion power to find an adverse public interest whenever a

person stands in such a relation to a specified company as

to create the possibility that there would be an absence of

‘‘arm’s-length bargaining’’;

Section 17(c) of the Public Utility Holding Company

Act of 1935 (15 U. S. Code §79q [c]) in which Congress

gave the same Commission power to find an adverse public

interest whenever an officer or director of a registered hold-

ing company is also an executive officer, direstor, partner,

*As Mr. Justice Jackson pointed out in Western Union v.

Lenroot, 323 U. 8. 490 (1945), the correct rule is that when Congress

has rejected an amendment and it does not appear that the amend-

ment was regarded by it as surplusage, the process of judicial inter-

pretation should not be employed to produce ‘‘an equivalent of the

bills Congress rejected’’ (323 U. S., at pp. 508-509).

appointee or representative of any bank, trust company,

investment banker or banking association or firm; and

Section 32 of the Banking Act of 1933 (12 U. S. Code

§78) in which Congress gave the Board of Governors of

the Federal Reserve System power to find undue influence

upon the investment policies of a member bank in a case

in which an officer, director, partner or employee of an

underwriting firm also serves as an officer, director or

employee of such member bank.

Thus every action, and indeed every inaction, of Con-

gress that can be consulted is consistent only with the

conclusion that, by enacting §409(a), it did not intend to

designate a person a ‘‘representative’’ of a director of

some other company simply because he is a banker and

behaves in precisely the manner to be expected of reputable

bankers by expressing a natural interest in bringing busi-

ness to his firm whenever that can be done without detri-

ment to the air carrier of which he is a director.

What little judicial authority has been found is to the

same effect. In Gilman v. Jack, Me. , 91 A. 2d 207

(1952), the Supreme Judicial Court of Maine held that “‘a

person is not a representative of an outside interest such

as an investment banker if he is not in any way under the

control of such interest and answerable to it for his acts.’’

That case involved a Federal statute, namely §17(c) of the

Public Utility Holding Company Act of 1935, supra, which

had been invoked under these circumstances: Petitioner

Gilman had been known to hold the same views on certain

financial problems of the company as did certain invest-

ment bankers. The latter had urged him to run for director,

voted for him, and their votes were necessary to his elec-

tion. Nevertheless the statute was held inapplicable

because the petitioner had not been shown to have owed

any duty to the bankers to support or carry out their views,

and there was no evidence that he was not to exercise his

own judgment in furthering the best interests of the com-

pany involved.*

The error of statutory construction committed by the

court below is evidenced not only by the unambiguous

language of the statute itself but also by the available

legislative history and judicial precedents. Petitioners

submit that the importance to the proper administration

of §409(a) of the Civil Aeronautics Act requires that the

writ be granted and the error of the court below corrected.

There was no substantial evidence of “consequen-

tial” competition between Pan American and United

Fruit and therefore no basis for depriving either of

those companies of the benefits of the services of one

of its directors.

As to the holding by petitioner Lehman of his director-

ships in Pan American and United Fruit, the Board held

that, before approval of the interlocking relationship would

be denied, it should appear that the competition between the

two companies ‘‘necessary to transcend the benefits accru-

ing from Mr. Lehman’s service as director of Pan Ameri-

can must be of some consequence’’ (R. 106).

The evidence showed that United Fruit, which is pri-

marily engaged in the business of growing and shipping

bananas and other tropical products (R. 99), uses a portion

* See also the concurring opinion of Chief Judge Learned Hand

in Rattner v. Lehman, 193 F. 2d 564, 566-567 (C. A. 2, 1952) in

which he concluded that §16(b) of the Securities and Exchange Act

of 1934 (15 U. 8. Code §78p[b]) was inapplicable in the absence

of a showing that Lehman Brothers had ‘‘deputed a partner [Mr.

Hertz] to represent its interests as a director on the board’”’ of

Consolidated Vultee. In the case at bar, there was an express find-

—e petitioners had ever been so deputed (R. 86,

seq. .

of the space of six of its 51 fruit and cargo ships to trans-

port cruise passengers (R. 100). These stop only at ports

which are points of export and import for cargo (R. 100-

101) and passenger service ‘‘is adjusted based on our

(United Fruit’s] requirements for bananas and sugar (R.

296). Analysis of the figures in the record (R. 401-405)

when compared with United Fruit’s published figures indi-

cates that only about of its gross receipts is derived _

from_crnise passengers. Likewise, about of Pan

_American’s passengers to Latin America ca_are carried to

Guatemala (R. 407), the terminal port of United Fruit’s

eruises (R. 100-101).

The holding of the court below that the amount of com-

petition between the two companies is ‘‘consequential’’ is

based upon approval of the Board’s theory that regard-

less of the types of vacation sought, there is such competi-

tion whenever two carriers serve the same ‘*general area’’.

Driven to its logical conclusion, this type of reasoning

would justify a finding of ‘‘consequential’’ competition

between carriers operating even in two different parts of

the world, since it could never be said that if the trip were

made attractive enough, a prospective traveler to Latin

America might not prefer to vacation in India. Of course the

vacationist’s dollar is being competed for by every carrier

and indeed by every owner of a landlocked vacation resort.

The error of the Board and the court below lies in the

fact that when two companies derive such a tiny portion of

their revenue from two such different types of services it

is, as Judge Prettyman put it, ‘‘wholly unrealistic to say

that the public interest would be affected adversely by the

presence of the same man on the two boards of directors.

of business” (R. 604). Affirmance of the Board by the

majority of the court below was put upon the ground ‘‘that

it was within the competence of the Board to conclude that

,there had been no due showing that the potential restraint

*ppon freedom of action would not adversely affect the

public interest’’ (R. 597).

Petitioners submit that this aggrandizement of adminis-

trative expertise constitutes error and raises important

and far reaching questions as to the standards to be

applied in the review of orders of administrative agencies.

The decision of the majority below virtually abdicated

the duty of judicial review by its deference to admin-

istrative judgment based on imaginary expertness. As this

Court has elsewhere recognized, Congress intended to end

such artificial judicial humility and restore judges to their

traditional role where they may be expected to know as

much about everyday affairs as administrators. Surely

the contrast between travel involving leisurely rest and

winged speed is one upon which judges need not hesitate to

require a rational administrative decision. These questions,

because of their larger implications, deserve review by

this Court.

Wuererore, your petitioners respectfully pray that a

writ of certiorari be issued to the United States Court of

Appeals for the District of Columbia Circuit, and that a

hearing upon and determination by this Court of the mat-

ters presented be had.

Dated, November 2, 1953.

Respectfully submitted,

Waurrney Norts Srrmovr,

Counsel for Petitioners.

Epwiuy L. Wrist,

Goren G. GaLLantz,

James L. Panis,

~ Smerson Toacuer & Bartiert,

of Counsel.

Appendix.

Section 409(a) of the Civil Aeronautics Act of 1988

[52 Stat. 1002, 49 U. S. Code §489(a)] reads as follows:

“Sec. 409(a) After one hundred and eighty days

after the effective date of this section, it shall be

unlawful, unless such relationship shall have been

approved by order of the Board upon due showing, in

the form and manner prescribed by the Board, that the

public interest will not be adversely affected thereby—

(1) For any air carrier to have and retain an

officer or director who is an officer, director, or mem-

ber, or who as a stockholder holds a controlling inter-

est, in any other person who is a common carrier or

is engaged in any phase of aeronautics.

(2) For any air carrier, knowingly and willfully,

to have and retain an officer or director who has a rep-

resentative or nominee who represents such officer or

director as an officer, director, or member, or as a

stockholder holding a controlling interest, in any other

person who is a common carrier or is engaged in any

phase of aeronautics.

(3) For any person who is an officer or director

of an air carrier to hold the position of officer, direc-

tor, or member, or to be a stockholder holding a con-

trolling interest, or to have a representative or nom-

inee who represents such person as an officer, director,

or member, or as a stockholder holding a controlling

interest, in any other person who is a common carrier

or is engaged in any phase of aeronautics.

(4) For any air carrier to have and retain an

officer or director who is an officer, director, or mem-

ber, or who as a stockholder holds a controlling inter-

est, in any person whose principal business, in pur-

pose or in fact, is the holding of stock in, or control

of, any other person engaged in any phase of aero-

nautics.

(5) For any air carrier, knowingly and willfully,

to have and retain an officer or director who has a rep-

resentative or nominee who represents such >fficer or

director as an officer, director, or member, or as a

stockholder holding a controlling interest, in any per-

son whose principal business, in purpose or in fact, is

the holding of stock in, or control of, any other person

engaged in any phase of aeronautics.

(6) For any. person who is an officer or director

of an air carrier to hold the position of officer, direc-

tor, or member, or to be a stockholder holding a con-

trolling interest, or to have a representative or nom-

inee who represents such person as an Officer, director,

or member, or as a stockholder holding a controlling

interest, in any person whose principal business, in

purpose or in fact, is the holding of stock in, or con-

trol of, any other person engaged in any phase of aero-

nautics.’’

Section 10(e) of the Administrative Procedure Act of

1946 [60 Stat. 243-244, 5 U. S. Code §1009(e)] reads as

follows:

**Sec. 10. Except so far as (1) statutes preclude

judicial review or (2) agency action is by law com-

mitted to agency discretion.

(e) Scorz or Review.—So far as necessary to deci-

sion and where presented the reviewing court shall

decide all relevant questions of law, interpret constitu-

tional and statutory provisions, and determine the

meaning or applicability of the terms of any agency

action. It shall (A) compel agency action unlawfully

withheld or unreasonably delayed ; and (B) hold unlaw-

ful and set aside agency action, findings, and conclu-

sions found to be (1) arbitrary, capricious, an abuse

of discretion, or otherwise not in accordance with law;

(2) contrary to constitutional right, power, privilege,

or immunity; (3) in excess of statutory jurisdiction,

authority, or limitations, or short of statutory right;

(4) without observance of procedure required by law;

(5) unsupported by substantial evidence in any case

subject to the requirements of sections 7 and 8 or other-

wise reviewed on the record of an agency hearing pro-

vided by statute; or (6) unwarranted by the facts to

the extent that the facts are subject to trial de novo by

the reviewing court. In making the foregoing determi-

nations the court shall review the whole record or such

portions thereof as may be cited by any party, and due

account shall be taken of the rule of prejudicial error.”’

INDEX

‘ PE CT al neue tel codemienanabeucebaccwaccses 1

kaa ga aS pecs I acer 1

NN an iides nih cdasncktdiabicnsinsensaneues 2

i PN ein con cue cen sOseaubbeeaniek skmecdaccam 3

INNIS ore a So Oe ore ca Le hac buwwemenade 3

; i iiinnnninadisccndneeenasheden abe dhmmeamams 9

SSE GSTS EY Bea oetppy Shr hae Gc a SAFEST, 8 ary See even em 20

; REC itinbunvatbdpemktddithicdwkdedeignesensingekues. 21

% CITATIONS

F Cases:

Addison v. Holly Hill Co., 322 U. 8. 607_.........-..--_- 16

4 Ames-Continental A. L., Interlocking Relationship, 1

: iy ip ac eG Gee lle nui gunna ch cnedoun we 18

3 Darling-Canadian Colonial, Interlocking Relationships,

LASS OSD”: EIRRESIS CRE IRS REST EU RAEI ey oars pa a Marg RON aT 18

Gilman v. Jack, 148 Me. 171, 91 A. 2d 207__-..-..--..__ 15

National Air Freight Forwarding Corp. v. Civil Aeronautics

DRO TOU Fi BO Oa Sse beeen ec kce 18

\ Pan American Airways—Hanes, Interlocking Relationship,

3% es Pe eR h ac awas un td cnewapoteste onudavecacome 14

a Ratiner v. Lehman, 193 F. 2d 564_-.......-------.--.--- 15

4 United States Lines Co. v. Civil Aeronautics Board, 165 F. 2d

g MPM OT Oli duw eC abaccucisdoassdbkedeeaacsissenauocace 18

q Banking Act of 1933, Sec. 12, 48 Stat. 194, 12 U. 8. C. 78_____- ll

" Civil Aeronautics Act of 1938, 52 Stat. 973,-as amended, 49

U. 8. C. 401, et seq.

Te ea es ae 12, 21

RN sie ec Ses Sides sn pects bres len. cito oaks Ua Secim t Saure aides 22

eh key Pid we houhovesenebseannconeuaudoan 12, 22

I th a eu da 3, 10, 11, 18, 14, 25

WINN ees oa ldni gl vaueclWal se eckeatuatcetawerd 12, 26

RR ER NE tb ce eek sk eee Raed oo atl a acti 12, 27

Public Utility Holding Company Act, Sec. 17(c), 49 Stat. 830,

Ey SE OPcaketcncnticieesacsncséounthnnepsiame tl

Securities Exchange Act of 1934, Sec. 16 (b), 48 Stat. 881, 15

Seep wt tee Sates

Rosert LEHMAN, JosePH A. THOMAS, AND FRED-

ERICK L. EHRMAN, PETITIONERS

Crvm. AERONAUTICS BoaRp

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE DISTRICT OF

COLUMBIA OIRCUIT

BRIEF FOR THE CIVIL AERONAUTICS BOARD IN

OPPOSITION

OPINIONS BELOW

The opinion. of the United States Court of

Appeals for the. District of Columbia Circuit

(R. 592-608) is not yet reported. The findings

and opinion of the Civil Aeronautics Board, en-

PEO HEAD, Shs AIR Pla: AED ANS). a0 et

reported. ail}

JURISDICTION

The judgment of the Court of Appeals was

entered on August 6, 1953 (R. 609). The peti-

tion for a writ of certiorari wag filed on Novem-

(1)

ber 3, 1953. The jurisdiction of this Court is

invoked under 28 U. S. C. 1254 (1).

Section 409 (a) of the Civil Aeronautics Act

makes it unlawful for an air carrier to have a

director who also is a director of, or has a repre-

sentative or nominee who represents him as a

director of, any common carrier or any com-

pany engaged in any phase of aeronautics, unless

such interlocking relationship has been approved

by the Civil Aeronautics Board upon a showing

that the public interest will not be adversely

affected thereby. The questions presented are:

-.1. Whether the Board properly found that

partners of an investment banking firm who serve

as directors of air carriers, surface carriers and

other aviation enterprises are representatives of

other firm partners who serve as directors of other

air carriers, where all of such partners seek and

obtain underwriting business from, and negotiate

mergers for, the companies of which they are

directors, and where the investment banking firm

receives substantial fees for such underwriting

and merger serviees which all the partners share.

2. Whether there was substahtial evidence to

support the Board’s finding that actual and

potential competition’ ‘between an airline and a

teamshi; company was sufficient to preclude ‘the

onrd’s approval of an interlocking directorship

between the two companies as not adversely

affecting the public interest.

STATUTE INVOLVED

The pertinent provisions of the Civil Aero-

nautics Act are set forth in the Appendix, infra,

pp. 21-27.

STATEMENT

The Board’s order in this case issued under

Section 409 (a) of the Civil Aeronautics Act

(Appendix, infra, pp. 25-26), dealt with two dif-

ferent types of interlocking corporate relation-

ships. One such relationship arose out of the fact

that partners in an investment banking firm who

were directors of companies covered by Section

409 (a)’ were found by the Board to be repre-

sentatives of other firm partners who were direc-

tors of air carriers. The other involved an indi-

vidual partner who held interlocking directorships

in an air carrier and a steamship carrier. We

shall discuss these two issues separately.

Petitioners are three partners in the investment

banking firm of Lehman Brothers. Each of them

is a director of an air carrier—petitioner Lehman

of Pan American World Airways, petitioner

Thomas of National Airlines, and petitioner

“The phrase “Section 409 (a) companies” denotes com-

panies covered by that. Section, 7. é.,. common carriers and

companies ees} in any ae of aeronautics.

<I53 cc

Ehrman of Continental Air Lines. In addition,

Lehman is a director of United Fruit Company,

and Thomas is a director of American Export

Lines, both common carriers. Another Lehman

partner is a director of Consolidated Vultee Air-

eraft Corporation, a company engaged in aero-

nautics, and of three other common carriers. A

fifth partner is a director of another common

carrier.

The Board ‘instituted proceedings to deter-

mine whether any of the foregoing directorships

involved interlocking relationships which required

Board approval and, if they did, whether they

were adverse to the public interest (R. 29-33,

34-37). After full public hearings, the Board

found ’* that Lehman partners who were directors

of these Section 409 (a) companies were in fact

representatives of the other partners who were

directors of air carriers, so that Board approval

of the interlocking relationships was required.

The Board examined the 22 resulting interlocks,

approved 17 as not adverse to the public interest,

and disapproved five with respect to which it

found existing and potential conflicts of interest

between the companies concerned (R. 98, 110,

111, 114, 125, 133, 134).“ The disapproved inter-

locks were between Continental and Consolidated

Vultee; between National and (1) Pan a

and (2) Consolidated Vultee, respectively; and

"The Board sleuted the Redings of Go ansiions (i. 198).

* Petitioners do not here challenge the Board’s findings as

to these conflicts of interest, but only the finding as to rep-

resentation.

between Pan American and (1) American Export

Lines, and (2) Consolidated Vultee, respectively.

The Board’s finding that the Lehman partners

who were directors of Section 409 (a) companies

were representatives of petitioners rested upon

a number of subsidiary findings. The Board

found that Lehman partners, including those here

involved, endeavor to secure for the firm, in

accordance with its wishes (R. 90), the under-

writing of any financing undertaken by companies

of which they are directors (R. 89); that under-

writing of security issues constitutes a substantial

portion of the firm’s business (R. 90); and that

profits from underwriting securities of Section

409 (a) companies are divided among the part-

ners in the same proportion as other profits

(tbtd.).* The Board further found that Lehman

partners also participate in merger negotiations

involving companies of which they are directors,

and that profits from such services similarly

accrue to the individual partners (ibid.). The

Board concluded that ‘“‘when a partner attempts

to secure an underwriting or participates in

merger negotiations, he acts on behalf of the firm

as its representative’ (R. 90-91), and that

“‘[w]hen a Lehman partner acts in furtherance

of partnership activities, he is acting on behalf

of himself and each of the other partners” (R.

* Pursuant to the prohibition in Section 409 (a), however,

partners who are directors of air carriers do not share in the

profits from underwriting securities of such companies.

129). Im reaching this eonclusion, the Board

specifically rejected the idea that every act done

by a Lehman partner as a director of an enter-

prise is on behalf of the firm or its partners

(R. 91).

| The Board stated that the word “represent-

’ ative” in Section 409 (a) should be given its

‘“‘ordinary meaning” as ‘‘a person who acts on

behalf of another” (R. 126); that the question

was whether such representation exists here ‘‘in

fact” (R. 129); and that such representation

élearly was shown by the examiner’s findings

“that partners who are directors do act to secure

business for the partnership from the corpora-

tions which they direct, that each partner under-

stands that other partners will so act, and that

each will share in the profits which may result

from the actions of his fellowpartners” (R. 127).

The Board further stated that its interpretation

ef Section 409 (a) was in accord with the “basic

Congressional purposes” (R. 126) ‘‘to avoid the

__ possibility of a director of one company exerting

pressure on competing or related companies to

stifle competition or impair the ability of that

eompany to contract on the open market for

oquigeaant vig 98).

The Court of Appeals affirmed the Board’s

order (R. 609). The court, per Judge Fahy,

stated that the activity of the Lehman partners

disclosed by the Board’s findings ‘‘comes to more

than some community of interest and some shar-

ing of common benefits as partners” (R. 600),

since it involves “‘literal representation by one

partner of another in partnership business” (R.

601). The Board is not required, the court held,

to separate the partner-directors into two sep-

arate personalities and to say that they represent

each other as partners, but not as directors, where

the representation is in regard to carrying on

the affairs of Section 409 (a) companies (ibid.).

The court pointed out that the Act does not speak

of control of one partner by another, but of

representation, and that there is such representa-

tion ‘‘when it exists in fact in substantial matters

affecting the regulated companies” (R. 602). The

court concluded that the Congressional intent in

Section 409 (a) would not be served by giving the

word ‘‘representative” ‘‘a narrow meaning in-

consistent with the purpose to keep the vital

aeronautical industry, in its component parts,

independent and competitive to the extent neces-

sary to secure sound development in accordance

with the needs of the foreign and domestie eom-

merce of the United States, the postal service,

and the national defense’’ (sbid.).* ,

¢ __* Judge Prettyman, dissenting, stated that under the “plata

Tanguage™ of the Act one Teter partner was not « repre:

281846—63-—__-2

Pan American and petitioner Lehman filed a

joint application (R. 56) for Board approval

(pursuant to Section 409 (a) of the Act) of an

interlocking relationship between Pan American

and United Fruit Company, a common carrier by

water, arising out of Lehman’s serving as a direc-

tor of both companies. After hearing,’ the Board

disapproved the application on the ground that

the applicants had failed to make the due show-

ing required by the Act that the public interest

would not be adversely affected by the interlock-

ing relationship (R. 99-108, 125, 134). This con-

clusion was based upon findings that Pan Ameri-

can and United were both engaged in carrying

tourist passengers between the United States and

points in the Caribbean area, that each was

actively seeking such traffic, and that there were

potential conflicts of interest between the two com-

panies in competing for such business (R. 100-

102, 106-108). The Board, applying its settled

precedents, found that the detriment to the public

from these conflicting interests outweighed any

possible benefits to the carriers involved (R. 108).

The Court of Appeals affirmed the Board’s

order on the ground that the Board’s finding

sentative or nominee of the other because “upon occasion” the

firm is awarded underwriting business and participates in

merger negotiations on behalf of the companies of which the

are directors (R. 605).

. is application was consolidated for hearing with the

Board proceedings described in Part I hereof.

“supported by substantial evidence’’ that the two

companies were ‘‘in competition to a consequen-

tial degree’? (R. 595), showed that the public

interest ‘‘might suffer through the restraint which

such conflict [of interest] might exert upon one

who is a director of both companies and respon-

sible for decisions in the conduct of their affairs’’

(R. 596-597). The court further held it was

within the Board’s competence to conclude that

there ‘‘had been no due showing that the poten-

tial restraint upon freedom of action would not

adversely affect the public interest” (R. 597).

ARGUMENT

A. Contrary to petitioners’ contention (Pet.

13), the narrow holding of the court below does

not present a question of general significance in

the administration of the Act.’ There is no basis

for the assertion (tbid.) that the “broad sweep”’

of the Board’s order and the decision below would

leave the Board ‘‘free to go at large and extend

the application of the term ‘representative’ to

every situation in which two or more partners of

@ non-aeronautical firm held membership on

boards of aeronautical companies.” Indeed, the

* Judge Prettyman dissented on the ground that there was

an insufficient showing of competition between the two com-

panies to support the conclusion “that United Fruit might

tend to obstruct Pan American * * *” (R. 604).

"We shall discuss the two groups of relationships sepa-

rately (see supra, p. 3).

Board specifically limited its finding of represen-

tation by Lehman partners ‘‘solely to such action

asa partner may take in securing business for the

firm and it is the only instance established by the

record in this proceeding in which the Lehman

partner represents the firm on the board of direc-

tors of a company” (R. 91). Similarly, the Court

of Appeals stated (R. 599) that ‘‘[c]ommunity of

interest due to membership in a partnership is not

in and of itself sufficient to require approval of

the relationship incident to partners being direc-

tors of Section 409 (a) companies. It cannot be

said that a director of an air carrier has a repre-

sentative who represents him as a director of

another Section 409 (a) company solely because

the two are partners in a third firm.”’

In other words, the decision below covers only

the possibly unique-situation of partners of an

investment banking firm who serve as directors

<2 of Section 409 (a) companies and wh6 ‘in fact

( represent’ other firm partners who are directors

0 on a) compares in the pro-

. curement of underwriting business and the con-

duct of merger negotiations for those companies.

A decision of such limited applicability presents

no question of such general significance as to

warrant further review by this Court.’

* This is the only case that has arisen under the representa-

tive provisions of Section 409 (a) since the Act was perm

in 1938,

B. In giving the word “representative” in

Section 409 (a) its ‘ordinary meaning” as “a

person who acts on behalf of another” (R. 126),

the Board is furthering the Act’s purpose to

keep the airline industry free of the possible con-

flicts of interest which interlocking relationships

may produce. Congress did not use ‘“‘representa-

tive’’ as a narrow word of art, but rather as a

broad practical concept designed to enable the

‘Gicular " rélationship—in—fact—invorves actual

representation. Significantly, Congress did not

dutfaw all ititerlocking relationships covered by

Section 409 (a) generally—as it did in similar

statutes "—but only those which the Board dis-

approved as adversely affecting the public inter-

est. Indeed, in the instant case the Board found

it necessary to disapprove only 5 of the 22 inter-

locks which resulted from the Lehman partner

directorships in Section 409 (a) companies.

One of the:major aims of Congress in passing

the Civil Aeronautics Act was, as the declaration

* Cf. Section 17 (c), Public Utility Holding Company Act

of 1935, 49 Stat. 830, 15 U. S. C. 79q (c), which prohibits any

registered holding company or subsidiary from having a

director who also is a director (or executive officer, partner,

appointee or representative) of any bank, trast company, in-

vestment banker, or banking association or firm, except in

Board to determine in each case whether a par- —

of policy in Section 2 makes clear,” to maintain

healthy and vigorous competition in the growing

air transportation industry, both among air

carriers themselves and in their relations with

surface carriers and non-carrier aviation enter-

prises. To this end, Section 408 prohibits vari-

ous direct and indirect (Section 413) control

relationships among air carriers, surface carriers

and non-carrier aviation enterprises unless ap-

proved by the Board,” and Section 409 requires

Board approval of interlocking relationships

among such companies,

The danger of possible conflicts of interest is

equally great whether the same man serves as a

director of two companies, or whether he is a

director of only one but has a representative or

nominee who is a director of the other. In either

case, vigorous competition or completely inde-

pendent relations between the two companies may

% Section 2 of the Act (49 U. S. C. 402) establishes as ele-

ments of the public interest in its administration “[t]he regu-

lation of air transportation in such manner as to recognize

and preserve the inherent advantages” thereof and the main-

tenance of “[c]ompetition to the extent necessary to assure

the sound development of an air-transportation system prop-

erly adapted to the needs of the foreign and domestic com-

merce of the United States, of the Postal Service, and the

national defense.” ,

11 A control relationship cannot be approved if it would be

inconsistent with the policy of Section 2, or would create a

monopoly and thereby restrain competition or injure another

air\carrier. Section 408 (b). Section 412 requires Board

approval of contracts between air carriers and between air

carriers and various other companies.

be impeded. In these circumstances, Congress

cannot be deemed to have intended in Section

409 (a) to subject all interlocking directorships

by one person to Board scrutiny, and at the same

time to have limited the Board’s jurisdiction over

interlocks through representation to those situa-

tions where the representative is an employee.

To construe the Act in this way—as petitioners

apparently seek to do (Pet. 8)—would, as the

Court of Appeals pointed out (R. 602), faciltate

the very evasions of the Act’s control over all

interlocking relationships which the representa.

tion provisions of Section 409 (a) were, inter alia,

designed to prevent.

Where the director and his representative are

partners in an investment banking firm, and each _

is seeking to obtain underwriting (and merger)

business from a Section 409 (a) company, the

possibilities of conflict are particularly serious, -

As the Board explained it (R. 131):

_ The efforts of a Lehman partner who is

a director of a section 409 (a) enterprise

Lehman partner who is a director of an air

carrier.which may compete for traffic with

that enterprise. In such a situation it

might well be that the prospects for Leh-

man Brothers obtaining this underwriting

business could be materially enhanced if a

Lehman partner could arrange for less

vigorous competition for traffic by the air

earrier. If the section 409 (a) enterprise

were a potential supplier of the air carrier

rather than a competitor for traffic, efforts

to obtain underwriting business from the

supplier might include efforts to facilitate

sale of its products to the air carrier.

This is precisely the sort of possible conflict of

interest which Section 409 (a) was designed to

reach.” Indeed, petitioner Lehman himself, as a

Pan American director, refrained from voting on

interchange arrangements between that company

and National Airlines because his firm had acted

as underwriter for National Airlines, on whose

board of directors another Lehman partner was

serving (R. 333). A clearer acknowledgment of

the conflict of interest between Section 409 (a)

companies, resulting from the Lehman firm inter-

locks, would be difficult to imagine.

The legislative history upon which petitioners

rely (Pet. 19-20) to support their narrow con-

struction of the Act is not persuasive. This his-

% The public interest standard of Section 409 (a) is, of

course, concerned with possible as well as actual conflicts of

interest. Whether particular partners ever attempted to uti-

lize the strategic position of, or exert influence over, their

representatives is immaterial, and Board disapproval of

particular’ interlocking relationships i in no way reflects ad-

versély -on the personal integrity of the individuals con-

cerned.. Pan American Airways—Hanes, Interlocking Rela-

téonship, 8 C. A. B. 617, 619, cited R. 597. The important

ideration is that an interlosking situation capable of such

t should be subject to the Board’s tory jurisdicti

ier herb 409 ay Bole aes

tory, while suggesting that one of the purposes

of the representation provisions was to reach a

director who ‘‘employed” a representative as a

director of another Section 409 (a) company, does

not show that this was the only purpose, or that

Congress thereby intended to limit the meaning of

representative to a person actually under the

director’s control.” Nor does the decision in

Gilman v. Jack, 148 Me. 171, 91 A. 2d 207, aid

petitioners. The dictum of the state court (Pet.

21-22)—that a person was not a representative of

an investment banker if not under his control and

answerable to him—was made in applying a

different Federal statute to a factual situation

which concededly would not create a representa-

tive interlocking relationship under Section 409

(a).

_ ™ The failure of the House of Representatives to act in 1943

upon a reported bill to extend Section 409 (a) to prohibit any

underwriter from serving as a director or officer of an air

carrier does not, contrary to petitioners’ suggestion (Pet.

19-20), show any Congressional intent in 1938 not to cover

interlocking relationships involving representatives who

were partners of underwriting firms.

_* Petitioners also rely (Pet. 22) on the concurring opinion

of Judge Hand in Rattner v. Lehman, 108 F. 2d 564, 566-567

(C. A.2). That case held that partners were not liable under

the insider-trading provisions of Section 16 (b) of the Secu-

rities Exchange Act of 1984, 48 Stat. 896, 15 U.S. C. 78p (b),

for the partnership’s short-swing profits solely because one of

the partners was a director of the company concerned. Judge

Hand’s concurring opinion stated that he was not deciding

whether the partners would be liable if they had “deputed”

a partner to represent their interests on the board of directors.

In short, petitioners’ reading of Section 409

(a) is not supported by the purpose or language

of the Act, its legislative history, or judicial

decision.” The Board’s interpretation, on the

other hand, is a reasonable one which fully ef-

fectuates the intent of Congress,

the Lehman partners serving as directors of Sec-

tion 409 (a) companies were in fact representa-

tives of petitioners. These findings—which peti-

tioners do not challenge—are that such partners

act on behalf of the firm in securing underwriting

business from, and conducting merger negotia-

tions for, Section 409 (a) companies; that the

fees from such underwritings and merger negotia-

tions constitute a substantial portion of the

Lehman firm’s income; and that all of the part-

ners share in such fees. Petitioners’ contention

(Pet. 2) that such underwriting and merger

activities are only ‘‘occasional”—upon which

Judge Prettyman’s dissent was grounded (R,

605)—has no support in the record.”

%* Petitioners’ contention (Pet. 14-15) that the decision

below conflicts with Addison v. Holly Hill Co., 322 U. S. 607,

is without merit. Patently, a case interpreting the phrase

“area of production” in the Fair Labor Standards Act has

no applicability in determining the meaning of “representa-

tive” under the interlocking relationship provisions of the

Civil Aeronautics Act.

%* The record shows that over a 15-year period the Lehman

firm obtained or participated in at least 70 underwritings of

security issues for companies on whose boards of directors

firm partners were sitting, including companies here involved

The fact, relied upon by petitioners (Pet. 18),

that the partner-directors are not required to

carry out instructions of the firm and their fel-

low partners does not negate the existence of

representation. For, as the Court of Appeals

pointed out, the Act speaks of representation, not

of control, and representation is present when it

“exists in fact in substantial matters affecting

the regulated companies” (R. 602). Indeed, the

record shows that the business community gen-

erally (R. 505, 539, 540), and the Lehman firm

itself (R. 500, 512, 523, 525), refer to Lehman

partners who serve as corporate directors as

“representatives’’ of the firm,

As petitioners concede (Pet. 22), the second

question presents only the narrow issue whether

there was substantial evidence to support the

Board’s finding that the competition between Pan

American and United Fruit was sufficiently ‘con-

sequential” to preclude approval of the interlock-

(R. 568-575). The record also shows that Lehman partners

or employees took part in merger negotiation involving Na-

tional and Northeast Airlines (R. 410-420, 423-432) ; Braniff

Airways and National (R. 453); Capital Airlines and Na-

tional (R. 480-432, 541-567) ; Delta Air Lines-National (R.

436-447); Pan American-National (R. 447-451); Conti-

nental Air Lines-Mid-Continent-National (R. 497-498) ;

Consolidated Vultee Aircraft Corp. and Lockheed Aircraft

(R. 370); Consolidated Aircraft and Consolidated Vultee

Aircraft (R. 353). This is not a record of “occasional”

forays into the activities on which the Board’s and the Court’s

findings were based.

ing directorate between them. The Court of Ap-

peals carefully reviewed the evidence on this point

(R. 595-596), and concluded that it fully sup-

ported the Board’s findings (R. 597). This con-

clusion clearly was correct, and presents no issue

warranting further review by this Court.

Petitioners’ argument (Pet. 24) that the Court

of Appeals gave undue “‘deference to administra-

tive judgment based on imaginary expertness,”’

misconceives the nature of the Board’s inquiry in

a Section 409 (a) proceeding. Under the Act,

applicants for approval of an interlocking direc-

torship are required to make a due showing that

the public interest will not be adversely affected

\ thereby. Such a showing must negative the pos-

\ sibility of any actual or potential conflict of in-

\terest between the two carriers. Ames-Continen-

tal A. L., Interlocking Relationship, 1 C. A. A.

498, 500; Darling-Canadtan Colonial, Interlocking

Relationships, 1 C. A. A. 641, 647. Whether such

a showing has been made obviously calls for ex-

ercise of the Board’s expert judgment as to the

effect upon an air carrier of competition from a

/ surface carrier serving the same area. Cf. United

States Lines Co. v. Civil Aeronautics Board, 165

F. 2d 849, 852 (C. A. 2); National Air Freight

Forwarding Corp. v. Civil Aeronautics Board,

197 F. 2d 384, 386, 388 (C. A. D. C.).

There was ample evidence to support the

Board’s conclusion that the competition between

Pan American and United Fruit was sufficiently

significant to preckude it from finding that an

interlocking directorship between them would not

adversely affect the public interest. The record

shews that both carriers actively promote and

provide tourist service between the United States

and the Caribbean area (R. 100, 106, 107, 400,

401, 402, 405), and that the volume of such busi-

ness is substantial (R. 102, 401, 407 ). While Pan

American offers rapid transportation and United

Fruit provides leisurely cruises, both carriers are

seeking traffie from the same pool of potential

customers—persons seeking a Caribbean vacation

at tourist rates. When to this present competition

is added the future competition, of which the

Board took account, it seems clear that the effect

of the interlocking directorate upon the two car-

Tiers was sufficient. to preclude Board approval.

CONCLUSION

The petition presents no substantial question

justifying further review by this Court, the de-

cision below is correct, and there is no conflict

of decisions. The petition for a writ of certiorari

should be denied.

Respectfully submitted.

Rosert L. STERN, »

Acting Solicitor General.

Stan.tey N. Barnes,

Assistant Attorney General.

DaniEL M. FRIEDMAN,

Special Assistant to the Attorney General.

Emory T. NUNNELEY, Jr.,

General Counsel,

JamMEs L. Hicusaw, Jr.,

_ Chief, Litigation and Research Division,

Civil Aeronautics Board.

DECEMBER 1953.

APPENDIX

The relevant provisions of the Civil Aeronau-

ties Act of 1938, as amended (52 Stat. 973, 49

U.S. C. 401, et seq.), are:

DECLARATION OF Po.icy

Sec. 2. In the exercise and performance

of its powers and duties under this Act, the

Authority [Board] shall consider the fol-

lowing, among other things, as being in

the public interest, and in accordance with

the public convenience and necessity—

(a) The encouragement and development

of an air-transportation system properly

adapted to the present and future needs

of the foreign and domestic commerce of

the United States, of the Postal Service,

and of the national defense;

(b) The regulation of air transportation

in such manner as to recognize and pre-

serve the inherent advantages of, assure the

highest degree of safety in, and foster

sound economic conditions in, such trans-

Peay and to improve the relations

tween, and coordinate transportation by,

air carriers;

. _ (¢) The promotion of adequate, econom-

ical, and efficient service by air carriers

at reasonable charges, without unjust dis-

criminations, undue preferences or advan-

tages, or unfair or destructive competitive

practices ;

(d) Competition to the extent n

to assure the sound development of an

air-transportation system properly adapted

(21)

to the needs of the foreign and domestic

commerce of the United States, of the

Postal Service, and of the national defense ;

(e) The regulation of air commerce in

such manner as to best promote its develop-

ment and safety; and

(f) The encouragement and development

of civil aeronautics.

GENERAL PoweRs AND DvtTres oF THE

AvuTHority (Boarp)

General Powers

Sec. 205. (a) The Authority [Board] is

empowered to perform such acts, to con-

duct such investigations, to issue and amend

such orders, and to make and amend such

me or special rules, regulations, and

pursuant to and consistent with

the provisions of this Act, as it shall deem

necessary to carry out such provisions and

to exercise and perform its powers and

duties under this Act.

CoNSOLIDATION, MERGER, AND ACQUISITION

(OF

Aets Prohibited

Sec. 408, (a) It shall be unlawful, unless

; proved by order of the Authority

i] as provided in this section—

a) or two or more air carriers, or for

any air carrier and any other common car-

rier or any person engaged in other

phase of aeranantica, to coneotl te or

into ie er ree

on For aif carrier. n con-

carrier, or arly pefson engaged in any other

phase of aeronautics, to purchase, lease, or

contract to operate the properties, or any

substantial part thereof, of any air carrier;

(3) For any air carrier or person con-

lling an air carrier to purchase, lease, or

contract to operate the perties, or any

substantial part thereof, of any person

engaged in any phase of aeronautics other-

wise than as an air carrier ;

(4) For any foreign air carrier or per-

son controlling a foreign air carrier to ac-

quire control, in any manner whatsoever, of

any citizen of the United States engaged in

any phase of aeronautics;

is) For any air carrier or person con-

trolling an air carrier, any other common

carrier, or any person engaged in any other

phase of aeronautics, to acquire control of

any air carrier in any manner whatsoever ;

(6) For any air carrier or person con-

trolling an air carrier to acquire control, in

any Manner whatsoever, of any person en-

gaged in any phase of aeronautics other-

wise than as an air carrier; or

(7) For any yverson to continue to main-

tain any relationship established in viola-

tion of any of the foregoing subdivisions of

this subsection.

Power of Authority [Board]

(b) Any person seeking approval of a

consolidation, merger, purchase, lease, op-

erating contract, or acquisition of control,

specified in subsection (a). of this sec-

eee we sh AnblinaliGe to the

Sun Ta eke ] shall notify the persons

tion, shall present an app

7 “Authori (Board), and thereupon the Au-

ori |

involved in the consolidatio merger,

chase, lease, rating contract, or acquisi-

, and 0

tion of contro er persons known to

have a substantial interest in the proceed-

ing, of the time and place of a public

hearing. Unless, after such hearing, the

Authority [Board] finds that the consolida-

tion, merger, purchase, lease, operating

contract, or acquisition of control will not

be consistent with the public interest or

that the conditions of this section will not

be fulfilled, it shall by order, approve such

consolidation, merger, purchase, lease, op-

erating contract, or acquisition of control,

upon :such terms and conditions as it

shall find to be just and reasonable and

with such modifications as it may pre-

scribe: Provided, That the Authority

[Board] shall not approve any consolida-

tion, merger, purchase, lease, operating

contract, or acquisition of control which

would result in creating a monopoly or

monopolies and thereby restrain competi-

tion or jeopardize another air carrier not

a party to the consolidation, merger, pur-

chase, lease, operating contract, or acquisi-

tion of control: Provided further, That

if the applicant is a carrier other than an

air carrier, or a person controlled by a

carrier other than air carrier or affili-

ated therewith within the meaning of sec-

tion 5 (8) of the Interstate Commerce

Act, as amended, such applicant shall for

the purposes of this section be considered

an air carrier and the Authority [Board]

shall not enter such an order of approval

unless it finds that the transaction pro-

will promote the public interest by

enabling such carrier other than an air

earrier to use aircraft to public advantage

in its operation and will not restrain

‘ competition. :

PROHIBITED INTERESTS

Interlocking | Relationships

Sec. 409. (a) After one hundred and

eighty days after the effective date of this

section, it shall be unlawful, unless such

relationship shall have been a proved by

order of the Authority [Board upon due

showing, in the form and manner pre-

scribed by the Authority [Board], that the

public interest will not be adversely af-

fected thereby—

(1) For any air carrier to have and re-

tain an officer or director who is an officer,

director, or member, or who as a stock-

holder holds a controlling interest, in any

other person who is a common carrier or

is engaged in any phase of aeronautics.

(2) For any air carrier, knowingly and

willfully, to have and retain an officer or

director who has a representative or nom-

inee who represents such officer or director

as an officer, director, or member, or as a

stockholder holding a controlling interest,

in any other person who is a common

carrier or is engaged in any phase of |

aeronautics.

(3) For any person who is an officer or

director of an air carrier to hold the posi-

tion of officer, director, or member, or to

be a stockholder holding a controlling in-

terest, or to have a representative or nom-

» directo r

holder holding a controlling interest, in

any other person who is a common carrier

or is engaged in hase of aeronautics,

(4) For any air earner to have and retain

an officer or director who is an officer, di-

. rector, or member, or who as a stockholder

holds a controlling interest, in any person

whose principal business, in purpose or in

fact, is the holding of stock in, or control

of, any other person engaged in any phase

of aeronautics.

(5) For any air carrier, knowingly and

willfully, to have and retain an officer or

director who has a representative or nom-

inee who represents such officer or direc-

tor as an officer, director, or member, or as

a stockholder holding a controlling interest,

im any person whose principal business, in

purpose or in fact, is the holding of stock

in, or control of, any other person engaged

in any phase of aeronautics.

(6) for any person who is an officer or

director of an air carrier to hold the posi-

tion of officer, director, or member, or to be

a stockholder holding a controlling interest,

or to have a representative or nominee who

represents such person as an officer, direc-

tor, or member, or as a stockholder holding

a controlling interest, in any person whose

principal business, in purpose or in fact,

is the holding of stock in, or control of, any

other person engaged in any phase of

aeronautics. |

PooLING AND OTHER AGREEMENTS

Filing of Agreements Required

Src, 412. (a) Every air carrier shall file

Board}

rier and any other air carrier, foreign air

carrier, or other carrier for pooling or ap-

portioning earnings, losses, traffic, service,

or equipment, or relating to the establish-

ment of transportation rates, fares,

charges, or classifications, or for preservi

and improving safety, economy, and ef-

ficiency of operation, or for controlling,

regulating, preventing, or otherwise elim.

inating destructive, oppressive, or wasteful

competition, or for regulating stops, sched-

ules, and character of service, or for other

cooperative working arrangements.

Approval by Authority [Board]

(b) The Authority [Board] shall by

order disapprove any such contract or

agreement, whether or not previously ap-

proved by it, that it finds to be adverse to

the public interest, or in violation of this

Act, and shall by order approve any such

contract or agreement, or any modification

or cancelation thereof, that it does not find

to be adverse to the public interest, or in

violation of this Act; except that the

Authority [Board] may not approve any

contract or agreement between an air car-

rier not directly engaged in the operation

of aircraft in air transportation and a com-

mon carrier subject to the Interstate Com-

merce Act, as amended, governing the com-

pensation to be received by such common

carrier for transportation services per-

formed by it.

Form of Control

Sec. 413. For the purposes of this title,

whenever reference is made to control, it is

immaterial whether such control is direct

or indirect,

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.