Petition for Writ of Certiorari — Pan American World Airways, Inc. v. Civil Aeronautics Board

Supreme Court brief1958

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AUG 12 1958

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ae AMERICAN WORLD AIRWAYS, INC:,

; ean. Petitioner, ers

et °- & , ’ ae “3!

~ CIVIL AERONAUT Ss ‘B ARD, |

: ; ‘Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

’ UNITED STATES COURT OF APPEALS FOR THE

7 DISTRICT. OF COLUMBIA CIRCUIT. =:

V Huby J. FRmEnvey,

Rosert G. Barnarp,

Attorneys for Petitioner,

Southern Building,

Washington 5, D. C

_ Of Counsel:

pe * Evirav Scxorr, .

ty Pan American World Aicweds, Inc.,

135 East 42nd Street,

New York 17, N. Y.

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TABLE OF CONTENTS *

Crrations To Opixioxs’ BrLow:......... sons PRE AEE. ie

oe Le hy |) Ge WA DpS DID REN Nerd aac FON At PER OR RE

ard : ars re

— QUESTIONS PRESENTED ,..... yearn Re sae SS PR eat ene

Coxsriturioxar Provision’ aNp Statutes - INVOLVED

STATEMENT ..........- sosessscsseeusediecseateeveseenceeses prea nad hadi enmeaetans dened

Reasons. for GRANTING THe “Writ:

A. The decision of the Court of Appeals, cone

flicts with applicable decisions of this Court

-B. The Court of Appeals decided an important

question of Federal law which, has not been

but which should be settled: by this Coyrt

tal

bad . °

DOmPnINt oj es Beier: Siascsciiaicidioesbontees

Appendix A—Statut¢ tory PROVISIONS WB. 2 20.52. cccecescienie :

<h . . :

Appendix B—Opinion below (20... ETE ht

: Citations.

Baltimore & Ohio Railroad Cy. 8. 3450.8

146° (1952) |

Midsoned& Maulattan Ro Ca, ome d States, 313

Cr. Ss. 98 (1941F perrat

Nimheall heaundru Co: X. ZT. 5. mn U. ee 1 (1949) Pee

Ning veCuited States, 34 UL So 25ELAGN2) oe:

¢:

PAGE

ye das

ee ee

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: 9

xk ,

a . PACr

Market Street Ro Co, Railroad Commission of

Caliternia, Od LL. &. aes COOP Ds ooilacehickee es ‘

Northern Pacy feller ay CocveoN orth Dakota. a.

U.S. 585 15) ialedeigcicsintantnsarigic pence ieaes 8.

hlic Servi ice Comn ston of Utah v. United States,

356 U.S. 421 Ys

Railway Evpress: Agency % Civil Ae rondutic s Board,

100 U. SApp. D.C: 165, 243°. 2d 422 (1957) >. —>

St. Louis dS. F. R. Co. v. Gill, 156 TS. 649 (1895) S

U" nited States vNQones, 336 UL S. GA CEE witeccecsstgneas 9-11.

ed nited States v/ New Sock Cantral Railroad Co: ;

iE Se 7 C1eas) SN ie Rem S PCN NONE ALON 7

Pi cidaat TION :

- Constitution of the Uiiited States, Amendmem Vo.0. 2.7

Bi Nestocslcsncpesqakclgitncadbdnceapcstecs witabtass a he

ly = . .

STaTUrtes:

Civil Acronautics “Act of 1948, : , a

49 U.S: C. 401 et ARIA Eee Danae. TNS oF TEER ns 93.7

Reorganization Plan No. 10 of 1995, 67 Stat. 644.000.2.5, 19

“

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a THE

Supreme Court, af thr United wiates

OCTOBER TERM, 1958 \

Pay. AMertian Wortp Arrways, Inc.,

Se es ; ; : e \ Vv.

: ; \ ¥ : ’

Civ. Aeronautics Boarp, . .

i Respondent.

is . 7 + » 3 F Ser ae irs 7

’ ‘ *

PETITION FOR A.WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE.

DISTRICT OF COLUMBIA CIRCUIT - .

Pan American ‘World Airways, Ine... your Petitioner,

prays that a writ of certiorari Je issued. to- review. the

judgment of the United States Court of Appeals for’ the

District. of Columbia C ircuit entered in the above-entitled

2.case on May 22 195s.

Citations to Opinions Below

The opinionvof the Civil’ Aeronautics Board, printed at

I! S-59,* is as vet unpublished except in mimeogrephed.

* Record referenges are to the printed Joint Appendix filed by the

"parties below and submitted here pursuant to Rule 2113) of this

Court. Pursuant to Rule 21(49, nine. additional copies of such

Apperidix have -been filed for consideration by this Court.

aA . A e . 649

x : ; | _ Petitioner,

e%.

, a : ; 4 ae ; ue

‘forme \ Orde rr No. EA1060, The opinion of the United

States c ourt of Appeals, printed in Appendix B, afra, i

reported in\ F. 2nd | -

"Jurisdiction \

The \udgme nt ‘we the ‘Court “of Appeals’ was ‘Gadel on

May 22. 195s. The” jurisdiction. of this, Court is invokes.

‘under 28 U &.C.; “Section 1254 ( 1).

~ Question Presented _ u

« oe

Can the United States lawfully require an air carrier

“\ to transport United’ States. mail at rates which fail ‘to

lneet the carrier's costs (including, prope rly ‘allocated com-,

. “mon costs) and provide no returm on inve ‘tment?

| Os ae ee

Constitutional Provision and\ Statutes Involved |

The \pfFtinent portions of Amendment V of the @onsti-

tution of.the United States, of Sections 40M, 405, 406 and

1006 of the Civil Aeronautics Act of .b938,\and of Reor-

ganization Mlan No. 10 of 19935 are printed in.)

infra. -~ —\ Sia |

ea cn Te lee

Statement ON a

Petitioner, Pan American World Airways, Tne. XP an

_ American”), is an air carrier engaged in the th@asporta-

tion by air of persons, property and mail under: certificates S

of public convenience and necessity issued by the Civil

. Aeronautics Board’ (“Board”) pursuant. to the provision:

“of Section 401 of the CiWl Aervnauties Act of 10s q

UBL... Section 481. -_ ‘certificates include OY

tificate authorizing such transportation between various

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f om ‘ y a - ; vi \ i

; Pe . r \: , os | ‘ . ‘ eae y\ °°

a ae 8 OW eei a Ape Pdi les 3? \

cities on the West Voast of the Unived States and) Japan.

Operations over tha, route, as well as othe authorized / \

operations in the Pac ite area, ére conduete by a divisibn

of Pan Amefican called the Pacific Dysine SAS

The Civil Aeronautics \Act. provides, in‘Section 401 (m),. ix

that holders of mail certificates “shall, provide Hecessary |

and adequate facilities and. service for the transportation

of amail, and shalkatrypsport\ mail whenever required’: *by

- the’ Postm ster MG ral,” fot which the air carrier “shall

he panes pt “ reasonable “ompensation.”” Section

406. provides thu’ ht ‘Bound shall fix and deter rinine “the 7

fair and reasonablé rates-Of pensation” to’ be ‘paid. by\ he

the Mostmaster' ‘General, Wt e Section 406,°as enacte

' provided that these rates should, under certain pci

tions, “inchide a subeidy. element, Reorganization’ Plan

10. of 1953, GT Stat C4, directed complete and

<eparation of subsidy: from compensation for the carriage

of mail by requiring the soard to fix the.rates to be paid

by the Postmaster General at a fait ‘and reasonable wh

“for the mail service as’ sach, with ‘my — ‘amount

re juired as subsidy to be paid by the Board, \ ,

The service rate established by the Board to he paid — .

Pan\ Ameriéan hy the Postmaster General for tha trans- _

portation of mail between the West ( ‘onst and ‘Tokvo, on

and, after April 1, 1955, was 46.446 per mail ' ton smile

(1.@., Sap voen of a ton of mail one mile, or a pound

of mail 2 miles), xubject to a proviso ‘that “the mail

ton a shal] be computed on a | Standard mileage of-

5.078 ailes.” ; \ ; . @

Pan: American’s objection relates to this proviso. As

against this so-called “standard mileage of 5,078 miles”, -

restrictions in Pan’ American's certificate compelled Pan

American to detour by a much longer route via a mid-

i acific island, and its most frequently. sope rated route was. La

| Bs ; \

‘\

6.685 niles hetween" San. Franciseo and Tokyo, and even.

futttier hetw een ‘Seatt ¢ Portland and Tokyo.® The

miles” was not the mileage

whitte, ¢ an Amer ‘rican’ was PX rinitted nd te fly ) the milease

_ operates hdisenie Seattle and RKokyo without réstriction-

\on its freedom to, fly the shortest and most direct route

OR: 102).°* The rate of 46.

Pan American applied to this fietj ous “standard mileage”

of {07S miles, is, in fact, the salve rate which had pre-

viously heen established by the. Board as the fair and

Mog a rate for’ Northwest A@rlines. Order No. K-

55, Adopt January 31.1956). ak 3

pal ect of paying Pan American for only srs miles

‘as to reduce its actual compensati: m1 dye ‘tween San ‘Fran

CISCO and ‘Tokyo from 4446 t0 only I otic per mail ton

mile. Stated differently, Whereas “ony: -the basis of the

Board's own findings as to* Pan Riieriean's: costs, Pan

Ameri¢an should be paid S5ULZL08 for carrying a tomof

EY mail betweeh San Francisco. and* Toles (45.206 % GUNS.

niiles), under the Board's Order Pair NSinerican is actually .

paid only 2.8.2 Yo (4.446 x 07S “wiles ), The rate of

“49:26 per mail, fon amile thus’ est: uti head by the. Board

\* Almost all of {ne mail-witecfed by the mileage proviso was

cartied by Pan Argerican to or from San Francisco (R. 83).

*"\In a separate later proceeding, the Board freed Pan American

of the \detour requirement Netween San Rrancisco and Tokvo, effective

October 1, 1957 ( Order’ Na F-11648), This permitted Pan Ameti-

ean to Qperate a: portion \ef\its service between San Prancisco an!

“Fokvo by a route shorter \than 6.688 miles but still longer thay .

5,078 milesqbettveen Seattle: and Tokvo. Part-of Pan American's,

service mn continue to be routed via Havyaii to pericritritaccztificates

obligations. ve,

##*. Pin American's own cost) Ginclading return on inveserient

would‘ have justified a rate of 43.2\e perston mile, assunting fu’

recognition of ‘mileage actually flown ¢R. 101). ‘

\ . \

\ \

r ton mile fixed for

iv “the Jereed cost to Pan American of carrving United ‘States

doesnot even cover Pan Américan’s operating expenses,

Which the Board itself computed to be 3o.72e per mail tom ON

mile (including allocated costs ‘in acconlance with the

Board's consistent practic «), and allows nothing for re-

turn on investment. On the basis of the Board’ s-estimate,

\ prepared in relation to thie calendar year 1955, the use

\of the “standard mileage” redyced Pan American's service |

dail pay for 1955 by $814,000, (R. 101). While forthe.

-pavied through September 30, 1956, this reduction in

*kerviee mail pay: led to an equivalent addition to, Pan

American's subsidy mail pay, since that date I Amer-

‘ican has been ona temporary mail rate providing no sub-

sidy and has suffered continuing loss for each pound of ©. \-

mail which it is competed to carry on & non: compensatory

basis. ‘ ae

United States mail istone of ac uceited categories of

traffic between the United States and: Tokyo, accounting -

* fora of the total poundage earried by Pan American

’

over this route during the period April through December, -'s ¥

195 ¢R. FO5-25). % .

Taking Pan American's: Pacifie operations as a whole,

mail wag 4 Q20e per ton nile, consisting of 4ha%e for

operating expenses and faite for taxes and return

investment, As a result gt the Inds cost West Coast

Tokyo rate. however, the effective rate‘for

Division is env 41.74e per ton mile CR. 101); whic

covers operating expe nse cand prevides a

mT HEPES

aniount for yet urn on inv} Stinent andtaxes, 5

Further, although Pan American also operates in other

areas, through ather Diwisions, the.Roard’s procedures and*

e standards for fixing’ service mail rates are such that none °

of the rates for these other-services contains any allowance

in «xeess of the eost of carrying the mail plus -a. fair

return on the allocaqed investment, Since. the Parric_

- Division rate Was Jess than compeé history it follows that = i”

. S

total compehsation for all fia service perfornied be Pan

American was less than compensatory. —

Pan, American” protested the’ West Coast- Tokyo. rate

hefore: the Board, urging, Ider alia, ‘that it is_ entitled,

under the statute and the Constitution, to be paid its costs

plus a ree isonable return on its investment for compulsory

mail service. However, the Board rejected Pan Ameri:

can’s contentions and held that the rate was reasonable on

the. ground that the Postmaster Genet ‘al had. no “need”

for Pan American's ‘circuitous rervicg and should not be ?

reqifired to pay for the added mileage ;, that Pan American

Les would obtain greater mail revenue with the same rate per

ton to Tokvo as Northwest Airlines than with a higher .

rate: anil that this would benetit Pan American and the

Ciovernment.- ;

The Court. of " Appes ils ne the District of . Columbia

Cireuit affirmed, except that it modified the order in ‘one

respect not relevant here. In essence, it held that Pan

American had failed to. establish that the rate was “ urfair-

cand unreasonable, as applied to it because e“a carrier

may be: required to charge for’a particular | service a.rate

which is not. frtly compensatory,” provided it is not

thereby caused to lose money on ifgeaver-all business.

Reasons for Granting the Writ © \

A. The decision of the Court of Appeals conflicts

with applicable decisions of this Court. /

"Petitioner made two basi arguments in support. of its

contention that the below ost tate established for’ it by

>the Board for the carriage of ‘Inail between the. West

-« ~ Coast and Tokye was. illegal. . Rach of these arguments _

rested on decisions of this Court interpreting the, Con--

stitution of the United Statesj and the decision of the

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‘Court of £ Appa i cithier ignores or is in contliet with such

decisions.

Pry %

(1) Petitioner relied first.on : earthen Pacifie Railway

Caysv. North Dakota, 256.0. 8. 585 (191: 9), which, held:

fs ae) that the determination of cost for the purpose

yp f

of est: lishing éompens tory rates under the Con-.

stitution must inelude’a fair: allocation. of, common |.

Yosts (236 2h S. at 596); and at iad

b) that a rate requiring a carrier to transport

: any “signii icant category of. traffic at less th an the

fully allocated gosts “(Cineluding eeapital costs) Is

unlawful (256 UL S. at 604), - S4

7 | |

; ¥ 3 .

NErGse -¢aine requirements are inherent’ inthe Board's.

statutory duty to establish “fair andre asonable rates of

compensation.” Although the order of the Board and

the. decision of the Court of Appeals clearly conflict with

Novittern Pactfie, they did net even, refer to tliat devi ‘ision.

(2) Petitioner ‘alec cole “me that the rite, eatablished

‘by the Board de prived it of its constitution: aul right under

_the Fifth Amendment to site { compensation.” <The Gov-

ernment -itself is the user of the service which it competed

Pan-American to pe form, under conditions zand- cirean

stances controlled hy the Govermment. It ix "settled thi

a earrier which ix: compelled te Igan=port United States

mail has a “eonstitufional right to “reasonable compen-

sation” for such required services, al a States ve Meir

Fork ntral Railroad Co, sy “13 {°, 73 (1929), oF Urt hie pene”

the notion thet the level cof Fatwa COMlpensatt |

depends in any way, am the deg to which the Gavern-

ment neds the ‘reqquisitioned] services, or on the cost’ of

. . °

alternative. service Fis fy Wlacious,* No in conflict with

Kimball Laundry Co. Ay B.. 338° “ SUD), whieh

naka clear, Ahat tlie ‘¢ owerien nt mast pay full compen.

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sation for what it. takes withou rard to whether fr

ne itanakes full use of what it has*taken. “The questibn

* this Court stated “what has the owner lost, not wl t

a the taker wained™ (338 TU. >> at 15 *

“A thotieh it ia not’, SO ; states “he Court below seemingly

ala that the’ furegoine decisions were oo iN-

vpplicable by Balfintore & Ohio Railroad Cove US. 545

U.S. 146 C103), This Court there Weld, elton quis

“tioning the principle of Northern Pacific, that the Inter-

ree i

state “Commerce Cominission could require railroads ‘to

‘ @y certain vegetables at less than eost in the absence

“of an allegation that the. cht longed rates would make Mny

@rilrond « Carry alt fresh Veuet tal les at on loss, where this

“was bat one of a long series of € Omission’ orders dealing

with “the fresh vegetable rate pattern. This decision to

allow? tlie Interstate. Commerce Commission reasonable

discretion to make “mninor alterations in avast, complex

network of rates that apply to fresh shipments throughout

_the Nation”. (345 TL So at 14s)* * does not allow the Civil

Aeronautics ‘Board to. fix a confisea tory rate-for the car-

“riage of United States, mail. a distinet « category of trattic

* While the Court below also referred toe toa ret Street Railway Co

\. Railroad Comintission “ot Caliior ma, 324 U. 548 (19455 and its

own decision in Raiivay Exfress Agency NM. Cit ‘if. Acronautics Board

z43 F. ind 422 (C:AAVE 19574, along with Baltimore && Oftro,

these decisions are so pk uinky im ippesite as to require bttle discussion

The Rail: way Earress ygconcy case held only that a carrier gay

velinmtarily establt-}: air freight rates W mich‘do not, fully meet all cost=

of ely ation, despité “objections of oa competitor. . The HE ORES!

‘Street Railéay casesustained a rate which was‘fait and reasonable ©

— thyetmsis of ‘the hetulemarket value of the properties ef a compas

engaged in an obsclescent form of transportation but in: dequate on

the hasis of the substanti: ly. higher beok value’ of the properties.

stating that “the due process clause * * * car nat be applied wit aia

to restore ‘ values that have been lost by the’ operation of econom!

forces” (BMPS, at 867): ne such situation exists here.

** Northern Pacific itself secnainiaen that rdte making bodies have

the degree of discretion permitted in B&O, asets clear from the dis-

cussjen in Vorthern Pacific (236. U.S. at 600) of St, ‘Louis & SFP

Co. Vv. Gill, 186.U. S640 61898), *

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"which, in 19D), accounted for more than, 200 of Pan

American's total) loads between the United States and

Tokvo— particularly when sueh ovate results in ao nen-

day meen! rate » fog all T. S, mail service performed

by Pan American. .

The Court below relied « on Y nited State sv. Jones, 336

VSP 641° (1949), where this Court held that a railroad

‘had failed to establish that a mail rate was “unfair and

unreasonable as applied to it” (336 U.S. at 66%).—In that.

_here—that the rate was below cost. Thusy the question

ated by this Court was what. Inethod of computation tof

cost “should “be takert as determinative. af costs and thus

af fair and reasonable rates” (350 FS. at 662; emphasis

added )> The deci ‘ision contains not the slightest sug-

gestion that the Goverrinent can lawfully reqnire mail to

ote carried at less than cost, including a fair allocation

ef common costs) and all costs found reasonable were

allied, Here, on the basis of the Phard's own findings,

the ra established for Petitjoner failed to comply with

that fundamental standard. ae”

Referring to Hudson d Manhattan Ro Co.sy. United

States, 313 U.S. 98 (1941); the Court below stated that

sthe ‘Board “was right in siving weight” to its—finding

‘that- Pan American—wasbetter off with the-same rate as

Koitdicent since it would thereby obtain greater mail’

revenue than with a higher rate. However! not only is it

for Pan American's. management to make this type of

business decision—and its judgment “was different from

that of the Board—hut Hudson & Manhattan did not in-

volve a less than compensatory rate for the traffic tow hich

the rate tinder review applied. me

* in. that case this Court, ina per curiam opinion, siistained ; a deter-

mination of the Interstate Commerce&Commission which authorize “da

fare increase from 6¢ to 8¢ on a service from New Jersey to dow: -,

~—etxe, however, the record did not show—what is shown .

B. The Court Mf panne decided an important

question of ‘Federal law -which has not been

but which should be ¢ettled by this Court.

of etitione r contended wid showed not onl? that the: Ww est

Codast-Tokyo imail rate was less than compensatory but

that-oas a result of the noncompensatory

ervice—the mail rates fixed for its entp€ Pacitie Division,

and for all its U.S. mail carriage, wgre noneompensatory.

But the Court of Appeals ignor all this and, after

‘referring to the statement in Baltimore-& Ohio, ‘supra,

that “So long as. a railroad is not caused by such regula-

Ose MONEY On ity, over-all business, it is: hard to-

think. that its property was being taken for publie use

‘without just compensation’ ” (345 U.S. at 148), went on

to state:

“Prrn Yunertean does not contend it will lose money

on? its overall Tokwo ebusiness, which * includes

earrving passengers and. freight as well as mail.”

This reasoning, and such reliance on Baltimore & Ohio,

raise the impertant question, Which has not been but

sliould be settled Dyethis Court, whether a-nonecompensa-

tory rate can, lawfully be established for the eompulsory ,

carriage of U. S. mail where, as a yeni of revenues cava

town New Y dt and disapprov ed the increase to.10¢ proposed by the

carrier. The decision of thg Interstate Commerce Commission, “227

LC.C. 741 (1938), shows ‘that the railroad operated: two. services

hetween New Tersex and New York City. one a short dine to down-

town New Y ork and the other a long line teuptown New York. The

| iy mice line was profitable. the uptown line was unprofitable, =~

e aggregate net income insiitherent te pre vide a fiir retuta. The ta

increase was proposed only for the downtown line, with the intention:

of generating énough profit, from that’ service to provide the carrier

with a fair return on its tofal operations. The instant case is clear!s

distinguishable on the facts, since there was no question that the Xe

fare fixed hy the Commaission produced more than an adequate retur:

for the traffic to which it applied. :

rate Tor this -

———-

ge eer

other -nonmail ‘traffic, fhe carrier is not caused by such

mail rate to lose money on its over-all\-business.

-The implications of tlie opinion of the Court of Appeals

vare-frighténing. If less than compensatory rates cah

lawfully be established for compulsory mail service wher: .

revenues from other traftie support the combined operation_

at a profit, then there ‘is no practical restraint on the

Giovernment’s power to commandeer mail service without

any compensation sat all. “This clearly ® would be ‘illegal,

-and there is no logical: or legal basis. for Sustaining %a

”

mail rate which, while providing some. .payment, does not

meet the cost of rendering the sétvice, :

This: important question was neither raised nor decided:

in United States vy. Jones, supra, Where the -issue was

whether the Interstate Commer ree Commission had fairly

determined the cost, of mail service. No one sought to

sustain the ruling of the Commission on the ground, relied

on here by the Court of Appeals, that the railroad was

not losing money on its over-all business.

The very fact that the court: below thought that -Balti-

more: Ohio supports a less than compe nsatory mail rate

if revenues from nonmail traflie result in an over-all profit

emphasizés the necessity for clear-cut) decision by this

Court. In our view, the court below soreiy overextended

Baltimore & Ohio. Indewd, even the practice of consider-

ing passenger deficits in. fixing freight rates is limited to \

those cases where “interstate passenger.service inevitably

and inescapably cannot bear its direet costs and its share

of joint or indirect costs.” Aiipy. United States, 44 US

24, 261+ (1952), The discrimination against the dimes?

and the ultimate consumer of the freight which this entails?

Thay have’ been thought unavoidable with respect to rail

-thination==nor oud the re ep any coneeivalTe hasis for one

—that the U.S. mail service “inevitably and ineseapably

‘

aaa bear its direct costs and ‘its vere revel joint or indirect .

gcosts.”

Whether

, lt ix also. important that this Court consider:

_ complex and unelear rail

__applied-testthe newtr Tiel of air tir trans portation, As Mr.

Justice Frankfurter stated in his. dissenting Opinton in

Public Serer United States,

- >. ~ ~ ¢ i)

B56 1. S242

Commissron of Utah vy.

( seal ‘

eee “There comes a tine in the development of tay,

especially When it concerns as, complex and: impor

: tant a subject as that in the present case, w

comprehensive survey mnust be made and the cum

lative effect of episodic instances appraised to

determine whether or not they reveal a hartienious

whole. Case by case adjudication, Without serutins

of ounderhvinge generalizations or presuppositions,

inust culminate inoan effort to determine whither

weare wolnge and. whether the direction cut by the

| Instances should be further pursued 6:

represents a deviation from the path demanded by

the purpose of the regulatory. legislation.” (pase

4209) : | |

e : °

specitic

It is even more iMportant that a proper start hae <n

‘ toward achieving a “harmonious whoie” in the still lars

undeveloped lield of air transportation. law. - 5

Pad

_ d ‘ 4. :

When a.

rate making principles: rete te ——

CONCLUSION.

F or. the foregoing reasons,

of certiorari should: be gran

Respectfully submitted,

“Hiwry J. FRienpvy,

Roserr G. Barxarn,

Attorneys for Petitiones,

Southern Buil: ‘ing,

Washington 5, D.C.

Of Counsel:

os inv ScHOTT,

Pan Aime rican Work Airw ay ; Tee.::

135 East! 42nd Street,

New York 17, N.Y. ae

Constitution of the United States

APPENDIX A :

STATUTORY PROVISIONS:

Amendment V—Capital Crimes; Due Process.

‘ -“No person shall be * * * deprived of prap-

‘erty without due process of law; nor shall private

property be taken for public use, without just com-

pensation.”

( ‘vit Aeronautics: Act mi: USC 401 7

‘Seétion 401 Covtifeates of Public Convenience and

Necessity (49° US@ 481)

“Requirement as to Carriage of Mail

(m) Whenever so duthorized by its. certificate, any

air carrier shall provide necessary and ade-

quate facilities and service’ for the transperta-

tion of mail, and shall transport mail whenever

required by the Postmaster General. Such air

carrier shall be entitled to :reeceive reasonable

compensation ‘for as hereinafter provided.”

Section 405 Transportation of Mail (49 USC 485)

“Mail Schedules:

(e) Fach air cearrier shall, from time to time,

file with the Authority and the Postmaster

Gierferal, a statement showing. the points be-

tween which such air earrier is authorized to

engage in air transportation, and all schedules,

cand all changes therein, of aireraft, regularly

operated hy .the carrier between. such -points,

. setting forth in respect of each such schedule

‘the points served thereby and the time of

arrival and departure at each such pomt. The

Postmaster General may designate any such

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‘ Appendix A ~ -

—= . schedule for the transportation of mail between

. the points between which The air carrier is,

: authorized’ by ‘its pee te to transport mail,

‘and may, bx order, require the air earrjer to

establish additional schedules for the trans- ,

portation of mail between such points. °° *"

Section 405~ ~ Transportation of Mail (49 USC Ph

} “Tender of Mail — J . S .

authorizing ‘the transportation ‘of mail by air-

' _eraft, the Postmaster General shall tender mail

} “to the holder thergof, to .the eltent required

\by the Postal Service, for transportation be-

“hyee n the points named in such certificate for

> the transportation of mail, and such mail shall

~ he transported by the air carrier holding such

“certific ate in accordance with sue ‘h rules, regu-.

lations, and Pequirements as may be promul-

“gated by the iis General under this

section.” kono :

. i,

Section 406, Rates for Transportation of Wait-(49 USC

ssi '

“Authority to Fix Rates \

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(a) The Authority is empowered. and ditecied, upen.

its own initiative or upon petition of the Post-

«master General or an air carrier, (1) to fix

and determine from time. to time, after notice

and hearing, the fair:and_reasonable rates.

compensation for the transportation of pees

by aircraft, the facilities used and useful there

~ for, and the service connected therewith (in-

cet cluding the transportation of*mail by an ai:

carrier by other means than aircraft: when.

Appendix A

éver such transportation is incidental to the

transportation of mail by aireraft or «is, made

necessary ‘by gonditions of emergency mrising

from aircraft operation), by each holder of a

certificate ‘authorizing the transportation of

mail \by aircraft, and to make such rates effee-

_ tive from such date as it shall determine to be

proper (2). to presegibe the method or meth-

ods, by ‘aircraft- -nile, pound-mile, weight, space,

or’ any ¢ombination thyreof, or otherwise, for

~~ each. air -¢

~ * + « .(3) to publish the same; and the rates so fixed

| > and determined shall be- ‘paid by the Postmaster

General from abpropriations for the transpor-

‘tation of mail Yy aircraft. o:

Seetion 408; Rates for Pisninsdieion of Mail ( 9 USC

486) ae. ~

\ (

“Rate- Making i Jements .

: 7 (b) In. fixing and de termining fair and‘ reasonable -

rates of compensation under: this section, the

Authority, considering the conditions peculiar’

to trahsportition by aireraft and to the par-

~tienlar adxcarrier or class of air carriers, may

fix differentNrates for different air carriers .or

‘classes of air Carriers, and différent “lasses of

Serviee.. In determining the rate in each case,

/the Authority shalPMake, into considerations

/ among other factors, the @ondition that sueh air

/_ earriers may hold and pide ten or —

authorizing the ‘arriage of mail only +ovid-

| : ing necessary and adéquate facilities ‘a ser.

~ viee for the transpertation of mail: such stand-

ards: respecting the character and- quality of

service to be rendered by ait, carriers as may

Sa pean’ such rates of compensation for.

rrier-or class of air carriers; and ° /

he’ prescribed “by or pursuant to laws and’ the

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“USC 646)

i piration of sa

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‘Appendix A : :

need of each such cartier for compensation for

the transportation of mail sufficient: to insure

- the performance of. such service, and, together

with all other revenue of the air cargier, to

enable such air carrier under honest, economi-

eal and efficient management, to maintain and

- continue the development of air transporfation:

to the extent and of the character and ‘ality

required ph etiongenr ye of the United States, .

the Postal Service, and the national defense.’

Section 1006 Judicial Reriew>ef Authority's Orders (49

“Orders of Authority Subject to Review. Thad

2 (a) Any order, affirmative op negative, issued by

. the Authority under vita Act, ¢xcept any order

a in-respect of any foreygn ~ Apa subject’ to

the approval_of the /President as provided in’

section SOtof this /Act, shall be subject to re-

view by the cirenitrourt—of appeals ofthe

United States of the United States Court of

_ Appeals for the District of Columbia upon

| petition, filed within sixty days after the entry

| __ of such.order, by any, person diselosing a sub

‘stantial internet in such order. After the ex.

sixty days a petition maybe

filed only by leave of court‘upon a showing of

reasonable grounds. for failure to file the peti

tion theretofore.” .

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(49 USC 646)

Ps \

~~ \

}\ Judicial Review of Authority's Orders

’ ~~ \

“Venue ° = FEN a?

(b) A petition under this section, shall be filed in

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7 “\the court:for the cireuit wherein the petitioner

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“IP:

“Appendix A

_- resides or has his principal place of business. or

‘ in the United States Court of Appeals for the

District of Columbia.”

Reorganization PlanNo. 10 of 1953, 67 Stat: 644

“Payments to Air Carriers moe:

Section 1. Traisfer of functions.—There are

hereby transferred to the Civil Aeronautics Board

(hereinafter referred to as the ‘Board’) the fune-

tions of the Postniaster Getieral with respect to pay-

ing, to each air carriéf so tiuch of the compensation

fixed and determined by the Board under section

406 of the Ciwil Aeronautics Aét-of 1938, (52 Stat.

————998, as ainended, 49 U.S.C. 486),-as is. in excess of

»--the aniount payable to such air carrier, under hon.

est, economical. and efficient management, for the

transportation of mail by aircraft, the facilities used *

and “useful therefor, and the services connected

__-—" therewith at fair and reasonable rates fixed and de-

> and the national defense.’ ”

termined. by the Board in accordance with that sec-

tion without regard to the following provision of

subsection (b) thereof; ‘the-need of such carrier for

‘compensation for the transportation of mail suffi.

cient to insure the performance of such service, and.

together with all other revenue of the air earrier, to

enable such air ¢arrier winder honest. economical,

and efficient management, to maintain and continue

j the devélopment of air transportation to the extent.

>and of the character and quality required for the

commerce of the United States, the postal service,

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FOR THE Dis tRic’ LZ OF COL UMBIA- CIRCUIT 2

ieee .* No. 1381%

Pax’ Amertcan Wort Airways, ING... PETITIONER

a g / oe ; sw;

Civi AkRoNAU TICS Boakb, RESPONDENT ee

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“On ee for Review of an ‘Order of the

ss Civil Aéronautics Board

. “ : 2

. \

° a Decided May 22. 1O58- ;

. Mr. Henry ef Frie ndly, with sia cee MWA Rohert C.

Barward Was ‘on the brief, for petitioner,

Mr.~ Morris Chertkor, Attorney, Civil. Neitieatie

dJoard, with whom! Wessrs. Franklin M. Stone, \Geiieral

Counsel, Civil: Aeronautics Boa. de John de W nner, Asso: .

Af ciate General: Counsek, isd] Aeronautics: Soard, i> iD

Ozment, Assistant General Counsel, l. itigation and MRe-

seareh, Civil, Acronguties Board, and Danigl M. Friedman, ae

. Attorney; Department of Justice, were-on the brief, for.” |

respondent. a ee a ; a p |

Before SMocerton, Chief Judge, sand. Bazetos and = /

Bercer, Cirewt Judges. ne an a

-Encerrox, Chief Judge: Northwest\tlies “a-shiort: route je

between Seattle and Tokyo. Pan American, wider its }

certifieate fom the Civil Aeronautics Board, ilies a much/ *

; ; . i j

\better’ ow uy reason of the “equalized” rate than it would

a os

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Py : ‘

: 22 &

| aN as. ape

pee cr ee Appendix B ?

longer route, via Hawaii, between San Franciseo and

Tokyo. The Board fixed the Same “se rvice” rate Qype

puted on thie basis of the shorter Northwest mileage, to he

paid by the Postmaster General for carrying mail to and

- from Pokvo by either route, :Pan:American contends this

equalized rate fails to meet the statutory? “fair and

reasonable” standard and the Mirth Amendment rust |

compensation’ randard because, though the” rate more

than covers out-of-pocket costs, it does not cover fully

sulocated costs plix om including a return on, allocated

investment.

“The burden: of, proof is on Pan Americ an to show ‘that

the rate is unfair and unreasonable as apphed to ait

Usaited States vy. dones, 336 U SL O41, 665, .We think: it

has not shown this. The) Board: says Pan American is

a F

he if rates were based on actual mileage, because the Post-

“master General woul then give Northwest nearly. all

Tokyo mail and this would, jtyke away a good deal of

Pan NXmerican’s revenue, WeQhink the Board was riglit

in giving weight to this faet” Midson & Manhattan R. Co.

vy. United States, 313 U.S. 08. “Tt is not theory. but the”

impact of the rate order which counts. Lf the. total eff bet

of the rate erder cannot be said’to-be unjust and unreason

able, judic ‘ial inquiry under the Aet is pt an end. sh Fede ps!

Powe? Commission ¥. Hope Natural Gas C7., 320 US. 5 MH

Oe" t+} + -

A carrier imay be required te charge fora particular

Service a rate that ix net fully compensatory, in the serse

that it does not) cover fully allocated costs and returs.

Be & OW R.-Co. ve United States, 345 US. 1462 Market

Stree R. Co ve Railroad Commission of California, 324

- ; “) .

ee. ai

Appendix B

Us. 548. Ch. Ratdleay Eapress Arency v. Civil Aero-

vautics. Board, 100 U.S. App. D.C. 165, 243 F. 2d 422.’ ISo

long as a railroad is mot caused by sugh regulations to

lose money on its over-all business, it is hard to think,

that it could successfully charge that its property. was

leing “taken forcpublie use ‘without just compensation.”

Bid OQ. R. Co. vy, Unitag States, supra at 148. Pan Amerj-

can does not ‘contend it will lose money on its over-all

Tokvo. business, whieh includes” carrying eee and

freight as well assmail. |

But for one point, we on re aflirin ‘be Board's order.

Pan Amerigan says thip servies rate should at least in-

clude an allowance for carrying = hetween San, F ran-

cisco and Seattle. We think this contention iS valid as far.

as it iS applicable; bat it is applicable only to so much of

Pan* American's Tokyo: mail as comes from or goes to

such points that if: it were carried) between Seattle ond

Tokvo®it would. have to be carried: between Seattle and.

San Francisco. We think the Board should determine how

mneh mail is in this earegoryeand revise its ordpr accord.

ingly. |

- —— Modified and affirmed,

n F

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