Petition for Writ of Certiorari — City & County of San Francisco v. Trans World Airlines, Inc.

MAR 1 4 1956

Crry anp County or San Francisco, 7

a municipal corporation, et al.,

Petitioners,

vs.

Trans Word AIRLines, INc.,

a corporation,

Respondent. ;

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit.

Dion R. Hom,

City Attorney of the City and County of San Francisco,

Tuomas M. O’Connor,

Public Utilities Counsel of the City and County of San Francisco,

Frank J. NEEDLES,

Deputy City Attorney of the City and County of San Francisco,

206 City Hall, San Francisco 2, California,

Attorneys for Petitioners.

Subject Index

Page

PT .27c tevadhestuwedeaerinnd cesses reavenhincekd 2

EE ho cindadenvcsvenddddscnssnccesdinsntsesies 3

MC (iit vs bb ecedeésdudkenscacnenbadees 3

Reasons for Allowance of the Writ and Questions Presented

Se MN dui wa eck enechss sents susbaien tusdutadenaves 7

I. In the Ownership of a Municipal Airport, Virtually

Il.

Wholly Paid For by Petitioner’s Taxpayers’ Money, Is

the Petitioner Operating a Public Utility, Which Re-

quires Equal, Uniform and Non-discriminatory Charges

for All Air Carriers Engaged in Foreign Interstate

and Intrastate Air Commerce Using the Same Common

Use Facilities, Regardless of Purported Fixed Charges

Set Forth in a Contract Between Petitioner and Re-

SOO 0 k5.06500dcendis tdddugentsentedsnscodies

A. The Operation of a Municipally Owned Airport,

Especially the Common Use Facilities, Is a Public

B. The Petitioner in the Operation of a Publie Util-

ity (Airport) Is Required to Charge Equal, Uni-

form and Non-discriminatory Charges for All Air

Carriers Engaged in Interstate Air Commerce

Using the Same Common Use Facilities at the

BOE cn niinncdes thociccachéawebbdtes¥ikeweas

C. The Contract of 1942 Between Petitioner and

Respondent, Although Valid When Made, Was

Always Subject to Regulation.................

In the Ownership of a Municipal Airport, Is Petitioner

by Its Charter and State Law Operating This Public

Utility as a Municipal Affair?..............+++..+.-

If the Ownership of the Airport Is Not a Municipal

Affair Under the Control of Petitioner, Is It a Federal

Affair Under the Civil Aeronauties Act of 1938, As

Amended, Divesting the Federal Courts of Jurisdiction

Until Administrative Remedies Have Been Exhausted?

16

19

27

ii Suszszor Inpex

Page

IV. If the Operation of the Airport Is Neither a Municipal

Nor Federal Affair, It Must Be a State Affair Con-

trolled by the Publie Utilities Commission of the State

of California, and This Court Is Without Jurisdiction 31

St wet tee he SSOP OD PSO EP SO OCDE REP SSF Cee e®

Table of Authorities Cited

Cases Pages

Air Transport Association v. United States ((1955), 9th

ih; Sl Pe nth cerchewannakivhdn den piadeas 10

Baltimore & O. R. Co. v. United States (1939), 305 U.S.507 15

Bowles v. City and County of San Francisco (1946), 64

A Manieds hi nos cinch os theese addnehienbedns és 23

Burke v. Board of Trustees, ete., 4 Cal. App. 235......... 2

California v. United States (1943), 320 U.S. 577.......... 16

City and County of Denver v. Board of Commissioners, 113

e:: SUE G a e on de hen ee as he ie > 27

City of Ardmore v. Excise Board, 155 Okla. 126, 8 Pac. 242 27

City of Pasadena v. Railroad Commission (1920), 183 Cal.

Ml cinbackns Sie eatin bo bdak bade ceaboudd edi teka an 16, 23, 25

City of Toledo v. Jenkins (1944), 143 Ohio St. 141, 54 N_E.

a Mls toch er ewok nb idea maani aah a ahe knee docdee wiles 10

City of Wichita v. Clapp, 125 Kan. 100, 263 Pac. 12....... 27

Durant v. City of Beverly Hills (1940), 39 C.A. 2d 133, 102

Se ht bkSs 8 a kt hcl chats is elt pds tnd 22

Dysart v. St. Louis, 321 Mo. 514, 11 S.W. 2d 1045......... 27

Ebrite v. Crawford (1932), 215 Cal. 724............... 23, 24, 32

General American Tank Car Corp. v. El Dorado Terminal

Co. (1940), 308 U.S. 422, 60 S.Ct. 325, 84 L. Ed. 361.... 30

Hesse v. Rath, 249 N.Y. 435, 164 N.E. 342................ 26

Hillsborough County Aviation Authority v. National Airlines

(1953), 63 So. 2d 61, 40 A.L.R. 2d 1056................ 26

Home Telephone Co. v. Los Angeles, 211 U.S. 265......... 25

In re Cortaro Water Co. (1933), 3 Fed. Supp. 257........ 18

Jochimsen v. Los Angeles, 54 C.A. 715, 202 Pac. 902....... 22, 23

Jones v. Keck (1946), 74 Ohio App. 549, 74 N.E. 2d 644... 10

_ SRR Pce se meeneNCrnaoroTa ee rene

iv Taste or AuTHoriTIEs CITED

Pages

Kansas and State ex rel. Parker v. Kansas City, 151 Kan. 1,

97 Pac. 20 104... 2c cccccccccccccccccscccscscccees 15

Kennedy v. Ross (1946), 28 Cal. 2d 569, 170 Pac. 2d 904.. 19

Krenwinkle v. City of Los Angeles (1935), 4 Cal. 2d 611.23, 24, 32

Law v. Railroad Commission (1921), 184 Cal. 737......-... 18

Leavitt v. Lassen Irrigation Co. (1909), 157 Cal. 82........ 16, 18

Limoneira Co. v. Railroad Commission (1917), 174 Cal. 232.16, 18

Loop Lumber Co. v. Van Loben Sels, et al., 173 Cal. 228... @%

Midland Realty Co. v. Kansas City Power & Light (1936),

Mott v. Cline (1987), 900 Cal. 496....000ccesccevercoeeee 18

People v. Western Airlines, 42 Cal. 2d 621 Deh cok adam Gain 20, 35

Pinney & Boyle v. Los Angeles (1914), 168 Cal. 1B. ...200 18

Polk v. City of Los Angeles (1945), 26 Cal. 2d 519, 150

Daa BA GBT... ccccccccccccvcscccccccccescccecososoce 23

Price v. Storms, et al., Board of Trustees (1942), 191 Okla.

410, 180 Pac. 2d 523......--.eeececcceccereesensercees 10

Railroad Commission v. Los Angeles Railway (1929), 280

UG. 214B .cccccccccccccccccccccccccccccccsccseseocees 18

San Diego Water Co. v. San Diego (1897), 118 Cal. 556.... 16

South Pasadena v. Pasadena L. & W. Co., 152 Cal. 579, 93

Pac. 400... cc ccccccccccccccccccsccccccsccecesssocess 22

Spring Valley Water Co. v. San Francisco, 61 Cal. 3......- 16

§.S.W., Inc. v. Air Transport Ass’n of America (CADCC

(1955) ), 191 Fed. 2d 658......---+-eeeeeeereees 28, 30, 31, 34

State v. Board of County Commissioners (1947), 149 Ohio

St. 583, 79 N.E. 2d 698......-. cece cee eceereeeeccreeee 10

State v. Clausen, 157 Wash. 457, 289 Pac. 61.....---.----- 27

State v. Jackson (1929), 121 Ohio St. 186, 167 N.E. 396.... 10

State ex rel. City of Lincoln v. Johnson (1928), 117 Neb.

BOL, 220 N.W. 278....-0cecerccrececcrecentenerstecees 10

Union Drygoods Co. v. Georgia Publie Service Corp. (1919),

et ila a ea Bl tg A ADL EER POE

Union Pacific Railroad Co. v. United States (1941), 313

so cic a isp haga nnateberias

United States v. Baltimore & O. R. Co. (1948), 333 U.S. 169 15

Tasiz oy AvrHorirres Crrep Vv

West Coast Advertising Co. v. San Francisco (1939), 14

Ce, SS GR, GS Ba Bia as si vadccccncsdcocs ks 19

Yosemite Ete. v. State Board of Equalization (1943), 59

Se St Oe EP Sriehechbeate bes te ddedhddodekede nuh: 25

Constitutions

California Constitution: Pages

MD as CINE hb oc ene a ccccccwccccscccéccke 19, 24

ong cn ss scene cnedceaboausan 19

Es cccikswabadnescedscaeeevcct 19, 21

ee es I, VccekccccbdccébdsedesVicctave 20

Statutes

Airport Development Act, 49 U.S.C., Section 1110......... 30

Municipal and County Airport Law (Cal. Stats. 1927, p.458) 23

California Publie Utilities Code:

i vonsekiheiebinedeeababddtacdss bdecebuns 32

SE £04 Joab ctnestcabdaces eos bieeetesosebeds 32

DM <vdecUseisnsbaakoswahensaseecéweiwane 33

1k veuhoue snaeddeced csccaecucbese nile 11

CT c2vi 1s chaadesesesinakhsnbakancdaadoos ll

tt Mn vttk dos spetneudaibbhedibenieuiunedeue 33

Section 21637 (Stats. of 1953, Chapter 151, Section 1) 13

California Statutes of 1911, Chapter 715.................. 24

i as Sn Penn). W's Sobed head vdéedue¥aneodie< 2

a ana cane pee dh neteuedceades 14

I ee 29

is cu camen 29

ns Pn: loos ceed ceccdeaecdeebeobecces 14

ts RM 2, ks. i be tin wdbcecdesadocedssbecn 29

od ds ten cg dvkudanbanothGeene chs 29

i oe oe aed enti peaek 30

i ML, 225 5 ioas ls nh Gbnbasideseeseseoeads 29

vi Tassie oy AuTHorities CITED

Charter of the City and County of San Francisco: Page

Beotion 190 ...cccccccccccccccccccccscccccccesccees 12

-

4

Iu the Supreme Court

OF THE

Rnited States

Octoser TERM, 1955

No.

Crry anp County or San Francisco, ]

a municipal corporation, et aL,

Petitioners,

> f

Trans Wor.p Arrives, INc.,

a corporation,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit.

The City and County of San Francisco, petitioner

herein, prays respectfully that this Court issue a writ

of certiorari to review the judgment of the United

States Court of Appeals for the Ninth Circuit

reversing the judgment of the District Court for the

Northern District of California, Southern Division,

wherein the Circuit Court of Appeals held that a con-

tract entered into with respondent, Trans World Air-

lines, Inc., in 1942 froze the established rates and

charges for the common use facilities at the San Fran-

cisco International Airport for a period of twenty

years, and that such rates and charges could not be

subsequently changed as to respondent, Trans World

Airlines, Inc., and that the City and County of San

Francisco is not entitled to judgment for the sum

of $95,942.64 from and after December 31, 1950 to

February 28, 1954, in accordance with the lawfully

established rates and charges fixed by the Public

Utilities Commission of petitioner and paid for by all

air carriers, with two exceptions, using the common

use facilities at the municipal airport.

JURISDICTION.

The judgment of the Court of Appeals for the

Ninth Circuit was filed and entered on December 19,

1955. (Exhibit ‘‘B’’.) A petition for rehearing was

filed on January 16, 1956; an order denying rehearing

was filed on January 31, 1956; an application for a

stay of mandate was filed on February 2, 1956, and

the mandate was by said Court of Appeals ordered

stayed on February 3, 1956, until March 5, 1956, and

on February 29, 1956, until March 19, 1956 or until

disposition of this petition.

The jurisdiction of this Court is invoked under

28 U.S.C., Section 1254(1).

OPINIONS BELOW.

The opinion of the Court of Appeals appears in the

appendix of this petition as Exhibit ‘‘A’’; and the

opinion of the District Court for the Northern Dis-

trict of California, Southern Division (119 Fed. Supp.

516), appears in the appendix of this petition as

Exhibit *‘C”’.

STATEMENT OF THE CASE.

In 1926 the voters of the City and County of

San Francisco approved an initial appropriation

of $100,000 for the construction of an airport. Since

that date, $50,000,000 of its taxpayers’ money has

been invested in the San Francisco International

Airport to make it one of the great air gateways

of the world. Twelve scheduled air carriers (Amer-

ican Airlines, Canadian Pacific, Ltd., Flying Tiger

Line, Inc., Japan Airlines, Pacifie Southwest Airlines,

Pan American World Airways, Qantas, Slick Air-

ways, Inc., Southwest Airways Co., Trans World Air-

lines, Ine., United Airlines, and Western Airlines,

Inc.) have been certificated to use this airport and its

terminal facilities. Also, there are numerous non-

scheduled carriers and private planes using the ter-

minal facilities. All aircraft use in common the run-

ways where planes land and take off; the landing

aprons, or ramps, where passengers and cargo are

taken on and discharged; the taxiways which connect

the runways with the landing aprons or ramps; and

other conveniences and facilities, such as lights, sig-

4

nals, beacons and control tower services. These are

designated the common use facilities of the airport.

In 1941 petitioner, through its Public Utilities Com-

mission, duly enacted a schedule of rates and charges

for the common use facilities at the municipal air-

port, which were applicable to all air carriers using

the facilities of its airport. The schedule of rates and

charges was fixed in accordance with Section 130 of

the Charter of the City and County of San Francisco.

Subsequent to the enactment of the schedule of

rates and charges, the petitioner in 1942 entered into

a contract with respondent, Trans World Airlines,

Inc., for certain land area, hangar facilities and

counter space for the sale of tickets in the terminal

building. The term of said contract was for twenty

years. Included in the contract was a schedule of

rates and charges for the common use facilities which

were identical, an exact transcription, in words and

figures, with the rates and charges set forth in the

duly enacted schedule of 1941 adopted by the Public

Utilities Commission of petitioner under Section 130

of the Charter of the City and County of San Fran-

cisco.

Incorporated in the agreement was this provision,

and it is fully set forth hereafter to emphasize its

importance in the controversy at bar. Section 3 of the

agreement states:

“Lessor further demises and lets unto Lessee

the use, in common with others authorized so to

do and on the same terms and conditions as apply

to others, of any and all general facilities, im-

provements, equipment and services which have

been or may hereafter be provided at said San

Francisco Municipal Airport, including, but with-

out limitation, the landing field, runways, aprons,

taxi-ways, sewerage and water facilities, marker

and surface lights, floodlights, landing lights, sig-

nals, beacons, aids, control tower, and other con-

veniences for loading, flying, landings, and take-

offs; and the causeways, docks, wharves and ap-

proaches thereto, parking areas, roads, streets,

bridges, spur tracks, and other facilities and ap-

purtenances of said Airport, for the Lessee, its

employees, passengers, guests, vendors and con-

tractors, patrons, and invitees, which use, without

limiting the generality thereof, shall include (all

of said facilities to be used and occupied in ac-

cordance with the rules and regulations of said

Airport) :”’

In 1946 the City, after extensive costly improve-

ments to the common use facilities fixed a new

schedule of rates and charges after due notice by

publication in a daily newspaper, public hearing, and

proceedings before the Board of Supervisors in ac-

cordance with Charter Section 130. (Exhs. S-1, S-2,

8-3, S-4, R. 624.)

Again, on November 12, 1950, and after further

extensive improvements including a new terminal

building then under construction, the petitioner’s

Public Utilities Commission adopted a schedule of

rates and charges after due notice by publication and

hearing for the use of the common use facilities at

- the Airport in accordance with Section 130 of the

Charter. Said schedule was approved by the Board

of Supervisors of the City and County of San Fran-

cisco and became effective on January 1, 1951. (Exh.

“B®”, R. 55; Exhs. T-1, T-2, T-3, T-4, R. 625.)

Respondent, Trans World Airlines, Inc., brought

this action for declaratory relief and injunction in

the United States District Court for the Northern

District of California, Southern Division.

The District Court ruled in accord with petitioner’s

legal conclusions that the furnishing of common use

facilities at the San Francisco International Airport

constituted a public utility service; that the Public

Utilities Commission of petitioner had rate-making

jurisdiction over the airport; and that the law does

not allow a public utility to depart from the regular

schedule of rates and charges by contract whereby one

consumer (TWA) would be given a preference over

other competing consumers in the same class.

The Court of Appeals, in reversing the decision of

the District Court, substantially adopted the respond-

ent’s contentions, and held that the operation of the

San Francisco International Airport was not a munic-

ipal affair, rather it was a federal or state affair;

that petitioner was governed by the State Municipal

and County Airport Act of 1927 rather than its Char-

ter of 1900 and its new Charter of 1932; that since

the Municipal and County Airport Act of 1927 per-

mitted contracts with air carriers for facilities at

municipally owned airports, the City and County of

San Francisco was bound by the terms of the contract

of 1942, and the rates for the common use facilities

were frozen for the duration of the contract (twenty

7

years); and that the City and County of San Fran-

cisco had by its action in entering into the contract

of 1942 suspended -its rate-making authority as to

respondent, Trans World Airlines, Inc. Further, the

Court of Appeals failed to rule on the question

whether in the operation of its airport, petitioner

is operating a public utility.

REASONS FOR ALLOWANCE OF THE WRIT AND

QUESTIONS PRESENTED FOR REVIEW.

1. The Court of Appeals has decided an important

state question in conflict with applicable state law, in

that its decision is contrary to numerous state appel-

late and Supreme Court decisions, holding that the

operation of municipally owned utilities is a “‘muniec-

ipal affair’’ within the meaning of a state constitu-

tional provision giving a municipal corporation oper-

ating under a freeholders’ charter governmental au-

thority over municipal affairs to the exclusion of the

state legislature.

2. The Court of Appeals has decided an important

question of federal law which has not been, but should

be, settled by this Court, in that said Court has ruled

that the operation of the said airport is not a munic-

ipal affair, but rather a state or federal affair, and

by so deciding, has raised the question of whether the

Civil Aermautics Board has jurisdiction to regulate

rates and charges for common use facilities at air-

ports serving interstate air carriers.

3. The Court of Appeals has decided a federal

question in a way in conflict with applicable decisions

of this Court, in that by this decision the Court of

Appeals permits petitioner to discriminate among the

several air carriers as to rates and charges for com-

mon use facilities at the said airport.

4. The Court of Appeals has rendered a decision

in conflict with the decision of another Court of Ap-

peals on the same matter, by failing to remand this

case to the District Court to await exhaustion of the

administrative remedy available to TWA before the

Civil Aeronautics Board.

All of the foregoing questions are of nationwide

importance and some are questions of first impres-

sion. Every municipality throughout the United States

which operates an airport and every air carrier will

be affected by the decision in this case, for the prob-

lem of rates and charges for common use facilities is

common to all, although in each case the problem

is colored by varying local statutes, constitutional and

substantive provisions.

The petitioner, air carriers, cities, counties and

states throughout the nation seek a final judicial

determination regarding the nation’s network of

airports by an answer to the questions as herein pre-

sented.

L

IN THE OWNERSHIP OF A MUNICIPAL AIRPORT, VIRTUALLY

WHOLLY PAID FOR BY PETITIONER'S TAXPAYERS’ MONEY,

IS THE PETITIONER OPERATING A PUBLIC UTILITY,

WHICH REQUIRES EQUAL, UNIFORM AND NON-DISORIMI-

NATORY CHARGES FOR ALL AIR CARRIERS ENGAGED IN

POREIGN INTERSTATE AND INTRASTATE AIR COMMERCE

USING THE SAME COMMON USE FACILITIES, REGARDLESS

OF PURPORTED FIXED CHARGES SET FORTH IN A OON-

TRACT BETWEEN PETITIONER AND RESPONDENT?

A. The Operation of a Municipally Owned Airport, Especially

the Common Use Facilities, Is a Public Utility Business.

Of prime importance to the whole aviation industry,

air carriers, airport operators and the Civil Aero-

nautics Administration is whether the operation of

an airport is within the public utility field. The ques-

tion has been presented in various state Courts and

slightly referred to in federal determinations. If the

operation of an airport is a public utility, no prefer-

ence for rates or charges can be given to one air

carrier over another in the same class.

In the instant case, the decision of the Court of

Appeals would permit twelve contracts varying as

to rates and charges between the petitioner and its

customers using the common use facilities at the mu-

nicipal airport; or, it would permit petitioner by

contract to give a preference to respondent for the

common use facilities as against air carriers in direct

competition with respondent. The District Court (119

Fed. Supp. 516) determined that all air carriers using

the common use facilities must be treated on a non-

discriminatory basis since the operation of the San

Francisco International Airport is a public utility

business.

: .

A review of the law in all jurisdictions where the

question has been presented definitely holds that the

operation of an airport by a municipality or other

governmental agency is within the public utility field.

See:

State v. Jackson (1929), 121 Ohio St. 186, 167

N.E. 396;

Jones v. Keck (1946), 74 Ohio App. 549, 74

N.E. 2d 644, 646;

State ex rel. City of Lincoln v. Johnson (1928),

117 Neb. 301, 220 N.W. 273, 274;

Price v. Storms, et al., Board of Trustees

(1942), 191 Okla. 410, 130 Pac. 2d 523;

City of Toledo v. Jenkins (1944), 143 Ohio St.

141, 54 N.E. 2d 656;

State v. Board of County Commissioners

(1947), 149 Ohio St. 583, 79 N.E. 2d 698;

Annotation, 161 A.L.R. 733.

In Air Transport Association v. United States

[ (1955), 9th C.C.A.], 221 Fed. 2d 467, the Court held

that the United States in the operation of the Elmen-

dorf Field in Alaska was engaged in a ‘‘public enter-

prise.”’

Respondent argues that the operation of the airport

and especially the promulgation of rates and charges

for the common use facilities is not a public utility

function. If respondent’s argument were true, peti-

tioner could forbid any air carrier from landing at

the San Francisco International Airport. It could,

at the termination of the contract cf 1942, charge

respondent any amount it so desired for landing and

takeoff charges, the use of taxiways, ramps and other

Lon

:

11

facilities. In other words, regardless of the provisions

of the Civil Aeronautics Act of 1938, as amended,

whereby respondent: received a certificate of public

convenience and necessity to serve Chicago, Illinois,

and San Francisco on a nonstop flight schedule, peti-

tioner, according to the argument of respondent, could

forbid respondent from landing and taking off at the

airport, or charge it six times more than it does Amer-

ican Airlines for the same privilege over the same

route.

That the San Francisco International Airport is a

public utility is fully recognized by the laws of the

State of California and the Charter of the City and

County of San Francisco.

Section 10001 of the Public Utilities Code of the

State of California defines ‘‘public utilities’ as it

pertains to municipalities in these words:

“**Publie utility’ defined. ‘Public utility’ as

used in this article, means the supply of a mu-

nicipal corporation alone or together with its

inhabitants, or any portion thereof, with water,

lights, heat, power, transportation of persons or

property, means of communication, or means of

promoting the public convenience.” (Emphasis

added.)

Section 10004 provides:

“Incidental powers included in power to ac-

quire and operate public utility. For the purpose

set forth in Sections 10002 and 10003 a municipal

corporation may acquire, own, control, sell or ex-

change lands, easements, licenses, and rights of

every nature within or without its corporate lim-

its, and may operate a public utility within or

SVQ...

a

12

without the corporate limits when necessary to

supply the municipality, or its inhabitants or any

portion thereof, with the service desired.” (Em-

phasis added.)

Section 120 of the Charter of the City and County

of San Francisco creates a public utilities commission

in the municipal government of the City and County

of San Francisco.

Section 121 of the Charter provides in part that:

“The public utilities commission shall have

charge of the construction, management, super-

vision, maintenance, extension, operation and con-

trol of all public utilities and other properties

used, owned, acquired, leased or constructed by

the city and county, including airports, for the

purpose of supplying any public utility service to

the city and county and its inhabitants, to terri-

tory outside the limits of the city and county, and

to the inhabitants thereof.’’ (Emphasis added.)

Section 122 of the Charter enacts that utilities

therein named, among which is the airport, **shall

each be designated as a department under the com-

mission.”’

Section 125 of the Charter provides, in part:

“The public utilities commission shall have

jurisdiction over the airport now being conducted

by the City and County of San Francisco, .. .”

It must be concluded, therefore, that petitioner

under federal, state, and City Charter provisions, in

the operation of the San Francisco Municipal Airport,

is engaged in a public utility business.

,4

_—

13

B. The Petitioner in the Operation of a Public Utility (Airport)

Is Required to Charge Equal, Uniform and Non-discrimina-

tory Charges for All Air Carriers Engaged in Interstate Air

Commerce Using the Same Common Use Facilities at the

Airport.

The fundamental principle of utility law, as adopted

by the District Court, that all customers (air carriers)

are to be charged equally and uniformly, without dis-

crimination, for the use of the common use facilities

at San Francisco International Airport, petitioner

submits is the recognized law of the United States.

This principle is set forth in the enactment of the

Civil Aeronautics Act of 1938, as amended.

The aircraft of all air carriers, scheduled and non-

scheduled, and all private aircraft are entitled, as a

matter of law, to land and take off from the San Fran-

cisco International Airport.

The provisions of the Public Utilities Code of the

State of California, and the case law of the Supreme

Court of the United States and California all empha-

size this principle.

Section 21637, Public Utilities Code of the State

of California (Stats. of 1953, Chapter 151, §1) pro-

vides :

“‘In no ease shall the public be deprived of its

rightful equal and uniform use of the airport, or

navigation facilities, or portion of either.”’

49 U.S.C., Section 1110, provides:

“The airport to which the provision relates will

be available for public use on fair and reasonable

terms and without unjust discrimination.” (Em-

phasis added.)

14

And in the enactment of the Civil Aeronautics Act

of 1938, as amended, the Congress of the United States

stated in the Declaration of Policy establishing the

Civil Aeronautics Board, 49 U.S.C., Section 402:

‘In the exercise and performance of its powers

and duties under this chapter, the board shall

consider the following, among other things, as

being in the public interest and in accordance

with the public convenience and necessity.

sé

‘““(¢) The promotion of adequate, economical

and efficient service by air carriers at reasonable

charges, without unjust discrimination, undue

preferences or advantages, or unfair or destruc-

tive competitive practices.’”” (Emphasis added.)

49 U.S.C., Section 484(b), provides:

‘“‘No air carrier or foreign air carrier shall

make, give, or cause any undue or unreasonable

preference or advantage to any particular person,

port, locality, or description of traffic in air trans-

portation in any respect whatsoever or subject

any particular person, port, locality, or descrip-

tion of traffic in air transportation to any wnjust

discrimination or any undue or unreasonable

prejudice or disadvantage in any respect whatso-

ever.’’ (Emphasis added.)

The Supreme Court of the United States has

uniformly held that there can be no discrimination

or discriminatory practices or preferences indulged in

by carriers in interstate commerce, whether by rail,

shipping or otherwise.

hepa

15

Baltimore & O. R. Co. v. United States (1939), 305

U.S. 507, held that where an interstate carrier’s ware-

house rates were not open to all shippers alike there

was a violation of the Interstate Commerce Act.

In United States v. Baltimore & O. R. Co. (1948),

333 U.S. 169, this Court stated:

“The Interstate Commerce Act is one of the

most comprehensive regulatory plans that Con-

gress has ever undertaken. The first act, and all

amendments to it, have aimed at wiping out

discriminations of all types. New York v. United

States, 331 U.S. 284, 296, 91 L. ed. 1492 on 1507,

67 S. Ct. 1207.

“It would be strange if this legislation left a

way open whereby carriers could engage in dis-

crimination merely by entering into contracts for

the use of trackage. In fact this court has long

recognized that the purpose of Congress to pre-

vent certain discriminations and prejudicial prac-

tices could not be frustrated by contracts even

though the contracts were executed before enact-

ment of the legislation.”

Kansas City, Kansas, attempted to give preferential

rates to tenants in its new terminal building. The

Supreme Court of Kansas, in Kansas and State ex

rel. Parker v. Kansas City, 151 Kan. 1, 97 Pac. 2d

104, held that the city had the authority to indulge

in such preferential practices. However, this practice

was enjoined as a violation of the Elkins Act in

Union Pacific Railroad Co. v. United States (1941),

313 U.S. 450.

16

The action of the Maritime Commission in forbid-

ding preferential treatment and establishing uniform

demurrage charges on wharves in San Francisco and

in the City of Oakland was upheld by the Court in

California v. United States (1943), 320 U.S, 577.

The California Supreme Court has repeatedly held

that public utility rates must be uniform, equal and

nondiscriminatory.

Limoneira Co. v. Railroad Commission (1917),

174 Cal. 232;

Leavitt v. Lassen Irrig. Co. (1909), 157 Cal. 82;

Spring Valley Water Co. v. San Francisco, 61

Cal. 3;

San Diego Water Co. v. San Diego (1897), 118

Cal. 556;

City of Pasadena v. Railroad Commission

(1920), 183 Cal. 526.

Also, Annotation in:

74 L. Ed. 234, et seq.

©. The Contract of 1942 Between Petitioner and Respondent,

Although Valid When Made, Was Always Subject to Regu-

lation.

There is no dispute as to the validity of the contract

entered into in 1942 between petitioner and respond-

ent. The rates for the common use facilities set forth

in the contract were the valid rates for all air carriers

using the same common use facilities at the San Fran-

cisco International Airport as duly enacted by peti-

tioner in 1941.

17

The Court of Appeals and respondent would divest

the Public Utilities Commission of petitioner from

ever changing the rates for the public utility service,

Le., the common use facilities, during the life of the

contract.

When the Public Utilities Commission duly enacted

a new schedule of rates in 1946 and again in 1950 for

the common use facilities at the airport, the contract

of 1942 between petitioner and respondent was sub-

jected to the new regulations governing charges.

In the instant case, the only governmental agency

that had the power to regulate the public utility rates

for the common use facilities was the Public Utilities

Commission of petitioner under Section 130 of the

Charter of the City and County of San Francisco.

Section 130 provides, in part:

“The commission shall have power to fix,

change and adjust rates, charges or fares for

the furnishing of service by any utility under its

jurisdiction, and to collect by appropriate means

all amounts due for said service, and to discon-

tinue service to delinquent consumers and to settle

and adjust claims arising out of the operation of

any said utilities.

‘Rates may be fixed at varying scales for dif-

ferent classes of service or consumers. The com-

mission may provide for the rendition of utility

service outside the limits of the city and county

and the rates to be charged therefor which may

include proportionate compensation for interest

during the construction of the utility rendering

such service,”’

18

Respondent was charged with the knowledge that

the common use facilities were always subject to regu-

lation by the proper governmental agency.

It is a fundamental principle of utility law, where

the law authorizes the regulation of service (common

use facilities) rendered the public, that such law be-

comes a part of and controls contracts providing for

the public service.

In re Cortaro Water Co. (1933), 3 Fed. Supp.

257 ;

17 C.J.8., §330, p. 784;

Pinney & Boyle v. Los Angeles (1914), 168

Cal. 12;

Law v. Railroad Commission (1921), 184 Cal.

737;

Leavitt v. Lassen Irrigation Co. (1909), 157

Cal. 82;

Limoneira Co. v. Railroad Commission (1917),

174 Cal. 232;

Mott v. Cline (1927), 200 Cal. 434;

Midland Realty Co. v. Kansas City Power &

Light (1936), 300 U.S. 109;

Union Drygoods Co. v. Georgia Public Service

Corp. (1919), 248 U.S. 372;

Railroad Commission v. Los ‘Angeles Railway

(1929), 280 U.S. 145, 152.

Also:

Annotation, 74 L. Ed. 234, reviewing both Cali-

fornia and Federal cases on this subject.

19

II.

IN THE OWNERSHIP OF A MUNICIPAL AIRPORT, IS PETI-

TIONER BY ITS CHARTER AND STATE LAW OPERATING

THIS PUBLIC UTILITY AS A MUNICIPAL AFFAIR?

Where a municipality avails itself of the provisions

of Article XI, Sections 6 and 8, of the California

Constitution, and becomes a chartered city, or being

a chartered city, or city and county, adopts a new

charter (as San Francisco did by adopting a new

charter in effect January 8, 1932), its powers over

municipal affairs become all embracing, restricted

and limited by the Charter only, and free from any

interference by the State through general laws. In

fact, the Charter supersedes all existing State laws

on the same subject matter. The city becomes inde-

pendent of general laws upon municipal affairs.

West Coast Advertising Co. v. San Francisco

(1939), 14 Cal. 2d 516, 95 Pac. 2d 138;

Kennedy v. Ross (1946) 28 Cal. 2d 569, 170

Pac. 2d 904.

Under the provisions of Article XI, §19 of the

State Constitution adopted in 1911 an airport is a

“municipal affair.” The first sentence of §19 of

Article XI provides:

“Any municipal corporation may establish and

operate public works for supplying its inhabi-

tants with light, water, power, heat, transporta-

tion, telephone service or other means of com-

munication.”’ (Emphasis added.)

An airport is a public work for supplying inhabi-

tants of the municipality with transportation within

aa

the meaning of the constitutional provision. This

is made clear in an interpretation by the State Su-

preme Court of the provisions of Section 20 of Article

XII of the California Constitution also adopted in

1911 relative to the powers of the State Public Utili-

ties Commission, in People v. Western Airlines, 42

C. 2d 621.

In that case, Western challenged the jurisdiction

of the State Public Utilities Commission to establish

intrastate rates for airline passengers on the ground

that Article XII, §20 of the Constitution which con-

ferred upon the Commission power over the rates

of ‘‘transportation companies’’ did not include air-

line companies. The Court, at page 635 stated as

follows:

‘“‘The fact that airline transportation compa-

nies were not in existence when the Constitution

was adopted in 1879 does not make them any the

less ‘transportation companies’ within the mean-

ing and contemplation of article XII. It was

well said by the Supreme Court of Nebraska in

State ex rel. State Railway Com. v. Ramsey

(1949), 151 Neb. 333, at page 338 (37 N.W. 2d

502): ‘. . . A Constitution is intended to meet

and be applied to any conditions and circum-

stances as they arise in the course of the progress

of the community. The terms and provisions

of constitutions are constantly expanded and

enlarged by construction to meet the advancing

affairs of men. While the powers granted

thereby do not change, they do apply in different

periods to all things to which they are in their

nature applicable. Pensacola Telegraph Co. v.

7 =

ere

21

Western Union Telegraph Co., 96 U.S. 1, 24

L.Ed. 708; 11 Am. Jur., Constitutional law §51,

p. 660; 9 Am. Jur., Carriers, §4, p. 430. These

principles have been held to be applicable to

transportation by air. ‘Transportation, as its

derivation denotes, is a carrying across, and,

whether the carrying be by rail, by water or

by air, the purpose in view and the thing done

are identical in result.’’ Curtiss-Wright Flying

Service v. Glose, 66 F. 2d 710, certiorari denied

290 U.S. 696 [154 S.Ct. 132, 78 L. Ed. 599]...

[citations omitted].’ ”’

Therefore, under Article XI, §19, San Francisco

was given the direct constitutional grant to establish

and “‘operate’’ an airport.

As heretofore pointed out, Sections 121, 122, 125,

and 130 of the Charter of the City and County of

San Francisco are the controlling laws as far as

petitioner is concerned in its operation of the airport.

These sections make the airport a public utility

under the jurisdiction of petitioner’s Public Utilities

Commission. Section 130 makes it mandatory for the

Public Utilities Commission to establish rates and

charges for the furnishing of services by any utility

under its jurisdiction.

The City owns its own water system, which serves

San Francisco, parts of Alameda County and most

of the San Francisco Peninsula area. This water

system links San Francisco with other areas and

serves neighboring and outlying communities; its

aqueducts and pipe lines stretch 150 miles from the

_ _ SARS meee m TSE N

high Sierras through the Coast Range to San Fran-

cisco. That the State of California is greatly con-

cerned with water is evidenced by a separate water

code which legislates for over fifty water agencies.

The use and control of water is more of a statewide

However, municipally owned water systems are

municipal affairs under the jurisdiction of the mu-

nicipality, and not subject to State regulation.

See:

South Pasadena v. Pasadena L. & W. Co., 152

Cal. 579, 93 Pac. 490;

City of Pasadena v. Railroad Commission, 183

Cal. 526, 192 Pac. 25;

Jochimsen v. Los Angeles, 54 C.A. 715, 202

Pac. 902.

If municipally owned water, light, heat and power

systems are ‘‘municipal affairs’, it necessarily follows

that a municipally owned airport is a ‘‘municipal

affair.”’

On the other hand all private public utility water

systems are under the jurisdiction of the Public

Utilities Commission of the State. In fact all private

public utilities are subject to the jurisdiction of the

State Public Utilities Commission.

The State Supreme Court long ago ruled that

municipally owned utilities were not under the juris-

diction of the State Public Utilities Commission. This

was amply pointed out by the Court in Durant v. City

of Beverly Hills (1940), 39 C.A. 2d 133, 137, 102 P,

2d 759.

And, in Polk v. City of Los Angeles (1945), 26

Cal. 2d 519, 539, 150 Pac. 2d 931, our Supreme Court

states : .

“The present Railroad Commission (now Pub-

lic Utilities Commission) was created by an

amendment to the Constitution on October 10,

1911 (Cal. Const., Art. XII §22). Thereafter

it was held that the powers conferred on the

commission did not extend to the regulation of

utilities operated by municipalities; that its

power of regulation was limited to privately

operated public utilities; and that the Legislature

could not extend that power to embrace mu-

nicipally operated utilities.”’

See also:

City of Pasadena v. Railroad Com. (1920), 183

Cal. 526, 192 P. 25;

Bowles v. City and County of San Francisco

(1946), 64 Fed. Supp. 609;

Jochimsen v. City of Los Angeles (1921), 54

C.A. 715, 202 P. 902.

The City cited both Krenwinkle v. City of Los

Angeles (1935), 4 Cal. 2d 611, and brite v. Crawford

(1932), 215 Cal. 724, to show that the California

Supreme Court regarded the operation of an airport

as a “‘municipal affair’. The Court of Appeals mis-

construed the purpose of the citations and stated:

‘These cases support the view that the conduct

of a municipal airport is a matter subject to

State Law.’’

San Francisco acquired its airport in 1926 prior

to the amendment of the Municipal and County Air-

24

port Law (Cal. Stats. 1927, p. 458). The airport

was not acquired under the State Airport Act as

in the Krenwinkle and Ebrite cases, supra. The

City’s xirport came into being under the provi-

sions of California Statutes of 1911, Chapter 715,

and Article XII of the Charter of 1900, as amended.

It was acquired as a public utility, just as the City

acquired the Spring Valley Water System, Market

Street Railway Company, and the California Street

Cable Railroad Company.

The fact that the Municipal and County Airport

Law refers to ‘“‘any such city and county” (San

Francisco being the only combined City and County

in the State) is of no significance, since the airport

was already established by petitioner prior to enact-

ment of the Municipal and County Airport Law.

The real question is whether the statute regulates

a matter of statewide concern or attempts to regulate

a municipal affair contrary to the provisions of Arti-

cle XI, §6 of the California Constitution. On two

occasions, where municipal affairs were involved,

California Courts have ruled that the San Francisco

charter and ordinance provisions prevail over gen-

eral statutes, in spite of the fact that the statutes

involved were addressed to ‘‘every city, or city and

county’? (Burke v. Board of Trustees, etc., 4 Cal.

App. 235), and to each contractor awarded a con-

struction contract ‘‘by any county, city and county,

city, town or district therein’. (Loop Lumber Co. v.

Van Loben Sels, et al., 173 Cal. 228).

i.

We have diligently searched the law in the State

of California and have been unable to find a single

case holding that where a municipality owns and

operates its own public utility, it is not a municipal

affair under the jurisdiction of the owner-munici-

pality.

Of main importance to the issue at bar and com-

pletely overlooked by the Court of Appeals was the

ratification of the new Charter of the City and County

of San Francisco in 1932 by the State Legislature.

The District Court pointed out that ‘the approved

charter of a municipality is a law of the state and

has the same force and effect as a law enacted by

the Legislature.” (Citing Yosemite Etc. v. State

Board of Equalization (1943), 59 Cal. App. 2d 39.)

The City agrees that when the contract was en-

tered into in 1942 with TWA it was a valid contract.

That contract, however, embodied every provision

of rates and charges for common use facilities at the

airport under the legal schedule adopted in 1941

by the City, under its Charter powers. The City at

the time of the contract was controlled by its Charter

of 1932 and not the general Municipal and County

Airport Law of 1927, which applied to cities and

counties that had not legislated on the same subject

matter.

Home Telephone Co. v. Los Angeles, 211 U.S. 265,

emphasizes that a City must have express power

through its charter to contract as to rates. No such

power is given to the petitioner through its Charter.

?

OW

The interpretation of what can and cannot be

done by authorities operating airports, especially

‘“eommon use facilities’ is ably expressed by the

Court in Hillsborough County Aviation Authority

v. National Airlines (1953), 63 So. 2d 61, 40 A.L.R.

2d 1056.

The contract of 1942 was valid when entered into

because the rates and charges set forth in the contract

were the valid rates for the ‘‘common use facilities’.

Those rates applied to all air carriers—not to TWA

alone. If the rates set forth in the contract were spe-

cial rates and not subject to further regulation by

the City, as a matter of law, the contract was ultra

vires, for the City is not empowered to divest itself

of its police power.

Commencing with the leading case of Hesse v. Rath,

249 N.Y. 435, 164 N.E. 342, it has universally been

held by the Courts that a City which owns and oper-

ates an airport performs this function as a matter of

local concern and is governed by the law applicable

to matters which concern the municipality exclusively

as a “‘local concern’”’ or “municipal affair.”

Mr. Justice Cardozo stated in the Hesse v. Rath

case:

“A city acts for city purposes when it builds

a dock or a bridge or a street or a subway. (Sun

Printing & Pub. Ass’n v. New York, 152 N.Y.

257, 46 N.E. 499, 37 L.R.A. 788) Its purpose is

not different when it builds an airport. (Wichita

v. Clapp, 125 Kan. 100, 263 Pac. 12, 63 A.L.R.

478) Aviation is today an established method of

27

transportation. The future—even the near future

—will make it more general. The city that is

without the foresight to build the ports for the

new traffic may soon be left behind in the race

of competition.’”’ (Emphasis added.)

Numerous other jurisdictions hold that the main-

tenance and operation of municipal airports are for a

municipal purpose and are municipal affairs. See:

City of Wichita v. Clapp, 125 Kan. 100, 263

Pace. 12;

Dysart v. St. Louis, 321 Mo. 514, 11 8.W. 2d

1045;

City of Ardmore v. Excise Board, 155 Okla.

126, 8 Pac. 2d 2;

State v. Clausen, 157 Wash. 457, 289 Pac. 61;

City and County of Denver v. Board of Com-

missioners, 113 Colo. 150, 156 Pace. 2d 101.

ITI.

IP THE OWNERSHIP OF THE AIRPORT IS NOT A MUNICIPAL

APFAIR UNDER THE CONTROL OF PETITIONER, I8 IT A

PEDERAL APFAIR UNDER THE CIVIL AERONAUTICS ACT

OF 1938, AS AMENDED, DIVESTING THE FEDERAL COURTS

OF JURISDICTION UNTIL ADMINISTRATIVE REMEDIES

HAVE BEEN EXHAUSTED?

Assuming without admitting, that the Court of Ap-

peals is correct, that petitioner can enter into a con-

tract giving a preference of rates and charges for the

common use facilities at the airport, the City submits

that such a contract must first be approved by the

Civil Aeronautics Board, since it would be a ‘federal

affair.’’

The evidence is uncontradicted that the contract in

question gives to TWA lower rates for the common

use facilities than those charged to ten other air car-

riers using the same common use facilities.

In S.S. W., Inc. v. Air Transport Ass’n of America

[CADCC (1955)], 191 Fed. 2d 658, the basis of the

complaint was that American Airlines, TWA, Braniff

Airlines, Colonial Airlines, Eastern Airlines, Capital

Airlines, Northwest Airlines, Pan American Airlines

and United Airlines had entered into an agreement

which violated the anti-trust laws. The Court ruled

that recourse must first be sought through the Civil

Aeronautics Board, and remanded the case to the Dis-

trict Court until the Civil Aeronautics Board had

determined if the contract in question was violative

of the provisions of the Civil Aeronautics Act of 1938,

as amended.

The Court stated (p. 661):

“The aircraft industry, like railroads and

power, is one in which Congress has decided that

the public interest is best served, not by free com-

petition, but rather by direct and uniform regula-

tion by an ‘agency authorized to supervise almost

every phase of the regulated company’s busi-

ness.’ ”

The Court further states (p. 662):

“Tt provides that ‘Every air carrier shall file

with the Board a true copy, or, if oral, a true

and complete memorandum, of every contract or

agreement (whether enforceable by provisions for

liquidated damages, penalties, bonds, or other-

wise) affecting air transportation and in force

on the effective date of this section or hereafter

entered into, or any modification or cancellation

thereof, between such air carrier and any other

air carrier, foreign air carrier, or other carrier

for pooling or apportioning earnings, losses, traf-

fic, service, or equipment, or relating to the estab-

lishment of transportation rates, fares, charges,

or classifications, or for preserving and improving

safety, economy, and efficiency of operation, or

for controlling, regulating, preventing, or other-

wise eliminating destructive, oppressive, or waste-

ful competition, or for regulatory stops, schedules,

and character of service, or for other cooperative

working arrangements.”’ (Emphasis added.)

In the case at bar there is no showing that TWA

had its contract approved by the Civil Aeronautics

Board by which it claims it is entitled to a preference

in rates for the common use facilities as against the

other air carriers using the same facilities under rates

and charges legally promulgated by the Publie Util-

ities Commission of the City.

The Civil Aeronautics Act provides for detailed and

comprehensive economic regulation by the Board. It

has control of certificates of public convenience and

necessity (49 U.S.C., Section 481); supervision of

rates and services (49 U.S.C., Section 484) ; authority

over mail rates (49 U.S.C., Section 486); loans and

financial aid from United States agencies (49 U.S.C.,

Section 490) and pooling or other agreement (49

U.S.C. 492).

Further, the Board is empowered to initiate or hear

complaints of ‘‘unfair or deceptive practices or unfair

methods of competition in air transportation,” and

to issue cease and desist orders against such practices

or methods of competition. (49 U.S.C., Section 491.)

Under the Airport Development Act, 49 U.S.C., See-

tion 1110 provides:

**As a condition precedent to his approval of a

project under this chapter, the Administrator

shall receive assurances in writing, satisfactory

to him, that—(1) the airport to which the project

relates will be available for public use on fair and

reasonable terms and without unjust discrimina-

tion.’”” (Emphasis added.)

In S. 8S. W., Inc. v. Air Transport Ass’n of Amer-

ica, supra, the Circuit Court remanded the case to

the District Court, as being consistent with General

American Tank Car Corp. v. El Dorado Terminal Co.

(1940), 308 U.S. 422, 433; 60 S.Ct. 325, 331; 84 L. Ed.

361, in which this Court said:

‘*‘When it appeared in the course of the litiga-

tion that an administrative problem, committed

to the Commission, was involved, the Court should

have stayed its hand pending the Commission’s

determination of the lawfulness and reasonable-

ness of the practices under the terms of the Act.

There should not be a dismissal but .. . the cause

should be held pending the conclusion of an ap-

propriate administrative proceeding.”

If the operation of the airport is a federal affair,

then, under the Civil Aeronautics Act, the Civil Aero-

31

nautics Board is a regulatory body with powers

analogous to those of the Interstate Commerce Com-

mission and the Maritime Commission.

The contract giving respondent, TWA, preferences

over other air carriers using the common use facilities

at the San Francisco International Airport should be

approved by the Civil Aeronautics Board before the

federal Courts take jurisdiction of the matter, and the

ease at bar should be remanded to the District Court

until such time as a ruling is made by the Civil Aero-

nautics Board, upon the right of the City to enter

into a contract giving preferential rates to TWA and

regulating the rates for the same facilities for ten

other scheduled air carriers. (S. S. W., Inc. v. Air

Transport Ass’n of America, et al., 191 Fed. 2d 658.)

We submit that if the matter before this Court is

a “federal affair’ the primary jurisdiction rests in

the Civil Aeronautics Board. Petitioner stil] em-

phasizes that the only logical and legal jurisdiction

in the instant case rests in petitioper’s Public Utilities

Commission.

IV.

IP THE OPERATION OF THE AIRPORT IS NEITHER A MUNICI.

PAL NOR FEDERAL AFFAIR, IT MUST BE A STATE AFFAIR

CONTROLLED BY THE PUBLIC UTILITIES COMMISSION OF

THE STATE OF CALIFORNIA, AND THIS COURT IS WITH-

OUT JURISDICTION.

Regulatory power must rest in some governmental

body if discrimination in the use of facilities eommon

—

32

to all air carriers is to be avoided. The City insists

that under Section 130 of the Charter it is empowered

to regulate the rates and charges for the common use

facilities at the airport.

The Court of Appeals in reviewing the Krenwinkle

and Ebrite cases, supra, states:

‘These cases support the fact that the conduct

of municipal airports is a matter subject to state

law.”’

Assuming, without admitting, that the operation of

an airport by a municipality is a “‘state affair’’, the

contract in question as to the common use facilities

would be ultra vires, since it gives preference to re-

spondent, TWA.

Section 453 of the Public Utilities Code of the State

of California provides:

‘*§453. Preferential rates prohibited. No pub-

lie utility shall, as to rates, charges, service, facil-

ities, or in any other respect, make or grant any

preference or advantage to any corporation or

person or subject any corporation or person to

any prejudice or disadvantage. No public utility

shall establish or maintain any unreasonable dif- —

ference as to rates, charges, service, facilities, or —

in any other respect, either as between localities

or as between classes of service. The commis-

sion may determine any question of fact arising

under this section.”’

Section 728 provides:

““§728. When fixing of rates by commission

required. Whenever the commission, after a hear-

ing, finds that the rates or classifications, are * * *

discriminatory, or preferential, the commission

shall determine and fix by order, the just, reason-

able, or sufficient rates, classifications, rules, prac-

tices, or contracts to be thereafter observed and

in force.”’

If the State owned or controlled the airport, the

contract in the instant case would be void. Section

21637 of the California Public Utilities Code provides,

in part:

“*§21637. Contracts, etc., for operation of air-

ports, etc. * * * In each case the commission may

establish the terms and conditions and fix the

charges, rentals, or fees for the privileges or serv-

ices, which shall be reasonable and uniform for

the same class of privilege or service and shall

be established with regard to the property and

improvement used and the expenses of operation

to the State. In no case shall the public be de-

prived of its rightful, equal, and uniform use of

the airport, air navigation facility, or portion of

either. The commission shall grant no exclusive

privilege for the sale or delivery of gasoline or

other petroleum products.’’

If the regulation of rates and charges of common

use facilities that respondent TWA complains is in

violation of the contract of 1942 and the question is

a “state affair’, according to the decision of the

Court of Appeals, then Section 1702 of the California

Public Utilities Code provides respondent TWA its

remedy.

__ AERC eT enan ene strane BE en

34

However, petitioner still emphasizes that the only

logical and legal jurisdiction rests in petitioner’s Pub-

lic Utilities Commission.

CONCLUSION.

The question involved in this controversy is a con-

flict between federal, state and municipal jurisdiction

over the regulatory power to set rates and charges

for public utility services, i.e., common use facilities

at a municipally owned airport.

The answer to the problem is novel, difficult and

important not only to petitioner and respondent, but

to all municipalities throughout the Nation, the air

carriers, States and the Civil Aeronautics Board.

Jurisdiction must rest somewhere, either in the city

that owns and operates the airport under its charter;

in the State, under the general laws vesting jurisdic-

tion in its public utilities commission; or in the Fed-

eral Government, under the Civil Aeronautics Act

of 1938, as amended.

Jurisdictional conflict exists between the federal,

state and local authorities.

The federal Court in S. S. W., Inc. v. Air Transport

Ass’n of America (1951), 191 Fed. 2d 658, stated, in

the matter of violation of the anti-trust laws, that jur-

isdiction rests with the Civil Aeronautics Board.

The Court of Appeals in the case at bar leaves the

question so vague that it cannot be determined

35

whether the federal, state or local authority has jur-

isdiction.

In People v. Western Airlines, 42 Cal. 2d 622, the

Supreme Court of California ruled that as to intra-

state fares, the Public Utilities Commission of the

State was the proper regulatory body.

In the case at bar, the District Court, 119 Fed.

Supp. 516, stated that the operation of the airport

was a public utility and the regulation of the common

use facilities was a public utility function under the

regulatory power of the petitioner through the pro-

visions of the Charter of 1932, especially Section 130

thereof.

Petitioner respectfully submits that for the forego-

ing reasons and questions involved herein this petition

for a writ of certiorari should be granted.

Dated, San Francisco, California,

March 2, 1956.

Respectfully submitted,

Dion R. Hoi,

City Attorney of the City and County of San Francisco,

THomas M. O’Connor,

Public Utilities Counsel of the City and County of San Francisco,

FRANK J. NEEDLES,

Deputy City Attorney of the City and County of San Francisco,

Attorneys for Petitioners.

(Appendix Follows.)

Appendix

EXHIBIT “A”

United States Court of Appeals

for the Ninth Circuit

"Trans World Airlines, Inc., a corpora-|

__ tion, Appellant,

vs.

| Gity and County of San Francisco, a

_ municipal corporation, Phillip S.

'. Landis, Sam McKee, Victor S. Swan-

son, Edward B. Baron and Donald No. 14,523

Pir A, Cameron, as members of the Pub- >

lie Utilities Commission of the City | Dee. 19, 1955

and County of San Francisco, G.

Dixon, as Manager and Chief Engi-

neer of the San Francisco Airport,

and J. M. Turner, Manager of Util-

ities for the Public Utilities Com-

mission of the City and County of

San Francisco, Appellees.

Appeal from the United States District Court for

the Northern District of California,

Southern Division.

Before: Stephens, Orr and Pope, Circuit Judges.

, Circuit Judge:

_ We have for determination the interesting question

“of whether or not the City and County of San Fran-

cisco, having contracted through its duly authorized

officials to permit Trans World Airlines, Inc., to use

' eommon use facilities’? at the San Francisco Inter-

national Airport, situate in San Mateo County, at

fixed rates for a term of years, may thereafter,

through its duly constituted Public Service Commis-

sion, change the contract rates.

In 1942 the City and County of San Francisco,

hereafter City, entered into a formal agreement, ex-

ecuted and to be performed in the state of California,

with Trans World Airlines, Inc., hereafter T.W.A.,

one of twelve scheduled airlines currently using the

airport. The lease was for a twenty-year term, at

charges fixed by the agreement. The property leased

consisted of a hangar and certain space in the admin-

istration building and, in addition, cer‘*in “‘common

use” facilities. Common use facilities are those areas

and facilities used in common by the several airlines.

Included in this category are landing fields, runways,

aprons, taxi-ways, sewerage, water facilities, various

lights and signals, control tower service and other

conveniences supplied by the airport.

On November 20, 1950, after notice and hearing,

the Public Utilities Commission of the City and

County of San Franciseo promulgated Resolution

No. 11,182, thereafter duly approved by the Board

of Supervisors of the City and County of San Fran-

cisco, purporting to establish prescribed rates and

charges for the use of the facilities of the airport.

The resolution fixed the charges for the common use

1Resolution No. 10,628, December 18, 1950.

iii

facilities at a figure higher than that set in the 1942

contract.

In January 1951 ‘the City notified T.W.A. that

T.W.A. would be expected to make payment for

future use of the common use facilities at the rates

fixed by the Commission’s schedule. It gave notice

that should T.W.A. fail to make such payments the

City would deny to T.W.A. the right to refuel its

planes at the airport. Thereupon T.W.A. sought an

injunction against this threatened action and prayed

for a declaratory judgment to the effect that its con-

tract rates are binding on the City. The City de-

fended on the ground that the 1942 contract was

superseded by the Commission’s resolution. The City

withdrew its threat to deny refueling privileges and

no hearing was held on the injunction issue. The Dis-

trict Court sustained the City’s theory and entered

judgment accordingly.

T.W.A. maintains that the City was granted express

statutory authority to enter into the subject contract

by section 4 of the Municipal and County Airport

Law (Cal. Stats. 1927, p. 458) which was in force in

1942. Section 4 provided, in part, as follows:

“In connection with the erection or maintenance

of any such airport or airports, or air navigation

facilities, any such city and county .. . or any munic-

ipal corporation, shall have the power and jurisdiction

... to lease or assign for operation such space or area,

. appurtenances, appliances or other conveniences nec-

*The provision was repealed in 1949 but similar provisions were

included in Government Code sections 50470-50478,

iv

essary or useful in connection therewith . . . to enter

into contracts or otherwise cooperate with the federal

government or other public or private agencies, and

otherwise exercise such powers as may be required

or convenient in the promotion of aeronautics and the

furtherance of commerce and navigation by air.”’

This statute grants plenary authority to lease and

contract. The use of the term ‘any such city and

county” is a direct reference to San Francisco, which

is the only combined city and county in the state.

It is not contended that in the execution of the con-

tract the parties failed to observe any formalities

necessary to the exercise of the powers conferred by

the statute. The City takes the position, however, that

the statute purports to regulate a “‘municipal affair”

and thereby violates certain prohibitions of the state

constitution.

Article XI, section 6 of the California constitution

provides, in part, as follows:

“| Gities and towns hereafter organized under

charters framed and adopted by authority of this

Constitution are hereby empowered, and cities and

towns heretofore organized by authority of this Con-

stitution may amend their charters in the manner

authorized by this Constitution so as to become like-

wise empowered hereunder, to make and enforce all

laws and regulations in respect to municipal affairs,

subject only to the restrictions and limitations pro-

vided in their several charters, and in respect to other

matters they shall be subject to and controlled by

general laws... .”

Article XI, section 8/j) provides in part:

“Municipal Affairs.

“It shall be competent in any charter framed under

the authority of this section to provide that the mu-

nicipality governed thereunder may make and enforce

all laws and regulations in respect to municipal af-

fairs, subject only to the restrictions and limitations

provided in their several charters and in respect to

other matters they shall be subject to general laws.”

T.W.A. recognizes that the effect of Article XI is

to preclude regulation by the state legislature of

“municipal affairs’*® but it contends that the opera-

tion involved in this suit is not included within the

meaning of that term as used in Article XI.

The phrase ‘‘municipal affair’ is a term of art. Its

meaning as used in the constitution must be sought

in the decisions of the California courts. The latter

courts have repeatedly declared that a matter is not

a “‘municipal affair’ unless it is of strictly local

interest. Any doubt is to be resolved in favor of state

regulatory power. Thus, in Los Angeles Ry. Corp. v.

Los Angeles, 16 Cal.2d 779, 783, 108 P.2d 430, the

Court said:

“. . . But the question here is disposed of by our

conclusion that the facts disclose that the one-man or

two-man operation of cars over the plaintiff’s railway

system is not a matter exclusively of municipal con-

*T.W.A. argues in the alternative that authority to enter into

the subject contract is contained in the San Franciseo Charter.

We inquire first as to the applicability of the statutory authori.

tation for the reason that the existence of such authorization is

material to other questions presented by this case.

vi

cern and is, therefore, not a municipal affair within

the meaning of said sections of the Constitution; and

that the question of such operation does not relate

merely to the power to make and enforce local, police

sanitary or other regulations covering the plaintiff

which it may be assumed has vested in the City of

Los Angeles, pursuant to the provisions of said sec-

tion 23; or, if it may be said to be a police regula-

tion, that it relates to a matter which is not strictly

a local affair and, therefore, has not been included in

the reserved power.”’

To the same effect, see City of Los Angeles v. Post

War, ete., Bd., 26 Cal.2d 101, 156 P.2d 746; Bay Cities

Transit Co. v. Los Angeles, 16 Cal.2d 772, 108 P.2d

435; Civic Center Assn. v. Railroad Comm., 175 Cal.

441, 166 Pac. 351; and Pac. Tel. & Tel. Co. v. City of

Los Angeles, 44 Cal.2d 272, 282 P.2d 36. See also,

McQuillin, Municipal Corporations, 3rd Ed., $4.85.

The facts of the instant case place it much farther

outside the orbit of a ‘“‘municipal affair” than do

those of any of the cases, supra.

The airport is not a strictly local affair. It is part

of a global system of air transportation. Its value

stems from the fact that it links the San Francisco

area with other areas served by airports. It directly

serves not only the City of San Francisco but all

neighboring and outlying communities. The airport is

used by military aircraft. Federal and state author-

ities regulate charges for common carrier air traffic.‘

‘See 49 U.S.C.A. §642; also, People v. Western Airlines, Ine.,

42 Cal. 2d 621, 268 P.2d 723.

vii

The City relies on the cases of Krenwinkle v. City

of Los Angeles, 4 Cal.2d 611, 51 P.2d 1098, and Ebrite

v. Crawford, 215 Cal. 724, 12 P.2d 937, in support of

its contention that the airport is a ‘municipal affair.”’

These cases, however, hold only that the maintenance

and operation of a municipal airport is an activity

in which a city may properly engage. In each case

the Court cited the municipal and county airport law,

supra, to show that the state had expressly authorized

this activity. If the Supreme Court of California

had viewed the operation of municipal airports as

a ‘municipal activity’’ in the technical sense of those

words, a matter thereby excluded from state regula-

tion, it could not have regarded the municipal and

county airport law as a source of authority to conduct

such airports. These cases support the view that the

conduct of municipal airports is a matter subject

to state law.

The authorities from other jurisdictions cited by

the City are distinguishable.’ They deal with the

question of whether or not a city has sufficient interest

in the construction and operation of an airport to

justify the expenditure of municipal funds, the use

of the tax power, the use of public properties or the

use of condemnation proceedings. As the Supreme

Court of California observed in the recent case of

Pacific Telephone and Telegraph Co. v. City of Los

‘City of Wichita v. Clapp, 125 Kan. 100, 263 Pac. 12;

Dysart v. St. Louis, 32 Mo. 514, 11 S.W.2d 1045;

City of Ardmore v. Excise Board, 155 Okla. 126, 8 P.2d 2;

State v. Clausen, 157 Wash. 457, 289 Pac. 61;

City and County of Denver v. Board of Commissioners, ete.,

113 Colo. 150, 156 P.2d 101.

viii

Angeles, supra, p. 281, the fact that the city could

lawfully regulate a business does not make the matter

a “municipal affair” in the sense that the general

state law is supplanted. We are persuaded that ex-

press statutory authorization existed for the execution

of the 1942 agreement.

The City has bound itself as to rates and charges

for the common use facilities by entering into a valid

contract expressly authorized by state law. Even 80,

argues the City, the rate schedule of the contract was

superseded by subsequent regulation by the Publie

Utilities Commission. In discussing this contention

we assume arguendo that the Public Utilities Com-

mission’s regulatory jurisdiction extends to the air-

port.*

The City had authority under this assumption to

proceed by contract or by regulation. It elected

to proceed by contract. The rule of law governing

a subsequent attempt by the municipality to vitiate a

contract such as that before us through subsequent

exercise of its regulatory power is well stated in 43

Am. Jur., §88:

“Tt has been held in numerous cases, however, that

a state legislature unless prohibited by constitutional

°T.W.A. urges that the airport is not a publie utility and

therefore subject to regulation by the Commission, that even

if it be ject to regulation the Commission has not lawfully

exercised its regulatory power in that there has been no finding

hearing that the contract rate was excessive and finally that

rms of the Commission’s resolution exempted the subject

tract. The resolution provided that the rates prescribed were

‘except as otherwise provided, or amended by agree

i

ee oo in, ee eed

Fa Ss eau ee

ix

provision may authorize a municipal corporation to

establish by an inviolable contract the rates to be

charged by a public ‘utility for a reasonable term

of years, the effect of which is to suspend, during the

life of the contract, the governmental power of the

state or municipality to fix or regulate the rates.’’ See

also, Annot. 74 L.Ed. 234, 236, to the same effect.

Authorities sustaining this rule are Publie Service

Co. v. St. Cloud, 265 U.S. 352, Vicksburg v. Vicksburg

Waterworks Co., 206 U.S. 496, and Femmer v. City

of Juneau, 9 Cir. 1938, 97 F.2d 649.’ In the Vicksburg

ease the Supreme Court held, p. 508:

“That a state may, in matters of proprietary rights,

exclude itself from the right to make regulations of

this kind or authorize municipal corporations to do

so, when the power is clearly conferred, has been too

frequently declared to admit of doubt. Los Angeles

v. Los Angeles City Water Co., 177 U.S. 558, Walla

Walla v. Walla Walla Water Co., 172 U.S. 1-7, New

Orleans Waterworks Co. v. Rivers, 167 U.S. 674, Free-

port Water Co. v. Freeport, 180 U.S. 587-593.”

In the instant case the statutory authority con-

ferring the power to contract was more express than

that found sufficient in the cases above noted.

The City cites a line of cases holding that contracts

entered into by a public utility and a private party

are subject to superseding subsequent rate making

"Cf. Home Telephone Co. v. Los Angeles, 211 U.S. 265.