428 F.Supp. 579 (W.D.Tex. 1977), SA 75 CR 29, United States v. Braniff Airways, Inc.

Docket Nº:SA 75 CR 29.
Citation:428 F.Supp. 579
Party Name:UNITED STATES of America, Plaintiff, v. BRANIFF AIRWAYS, INC. and Texas International Airlines, Inc., Defendants.
Case Date:March 15, 1977
Court:United States District Courts, 5th Circuit, Southern District of Texas

Page 579

428 F.Supp. 579 (W.D.Tex. 1977)

UNITED STATES of America, Plaintiff,


BRANIFF AIRWAYS, INC. and Texas International Airlines, Inc., Defendants.

No. SA 75 CR 29.

United States District Court, W.D. Texas

March 15, 1977

Page 580

John M. Pinckney, III, First Asst. U. S. Atty., San Antonio, Tex., Raymond W. Philipps, Stephen B. Gillman, Judy L. Whalley, U. S. Dept. of Justice, Antitrust Div., Washington, D.C., for the U. S.

Allan I. Mendelsohn, Washington, D.C., for Burton S. Kolko.

Melvin C. Garbow, David H. Lloyd, Steven P. Lockman, Peter T. Grossi, Jr., Arnold & Porter, Washington, D.C., J. Burleson Smith, Cox, Smith, Smith, Hale & Guenther, San Antonio, Tex., W. B. West, III, Clark, West, Keller, Sanders & Butler, Dallas, Tex., for Braniff Airways, Inc.

B. J. Bradshaw, Richard N. Carrell, Fulbright & Jaworski, Houston, Tex., George H. Spencer, Clemens, Spencer, Welmaker & Finck, San Antonio, Tex., for Texas Intern. Airlines, Inc.


SPEARS, Chief Judge.

On this 16th day of February, 1977 the Court heard oral arguments by all parties upon the motion of the defendants to dismiss the indictment. For the reasons stated herein the Court bases this Order not only on particular grounds for dismissal set forth by the defendants, but also upon the totality of the circumstances surrounding this prosecution.

Defendants who are certificated interstate airline carriers were the subjects of a two-count indictment returned in this Division on February 14, 1975, for alleged violations of the Sherman Act in conspiring to prevent and exclude Southwest Airlines, Inc., an intrastate air carrier from doing business in Texas.

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The respective positions of the Government and of the defendants have been exhaustively briefed and have been examined by the Court prior to argument. Seven principal grounds are presented by the motion to dismiss. As briefly as is possible, they may be summarized as follows:

1. The Court is without anti-trust jurisdiction over the competitive practices raised by the indictment, in that the Federal Aviation Act confers exclusive jurisdiction and pervasive regulatory authority upon the Civil Aeronautics Board with respect to such practices.

2. Under Section 414 of the Act, 49 U.S.C 1384, approval by the CAB of certain agreements among defendants and other CAB-certificated carriers which embrace the competitive practices challenged in this case relieved defendants from operation of the anti-trust laws and rendered them immune from prosecution.

3. Under the First Amendment, defendants' efforts to obtain administrative and judicial relief from the CAB and the Courts, in proceedings raising important issues of public policy concerning the power of the CAB to prevent intrastate air carriers from illegally burdening and engaging in interstate commerce, placed defendants beyond the reach of the anti-trust laws and are not subject to penalties.

4. Court decisions regarding transactions regulated by federal agencies, but less pervasively regulated than defendants' transactions, which refer matters to the agencies for initial decision under the doctrine of primary jurisdiction, suggests dismissal of the instant indictment as an a fortiori matter.

5. The indictment is impermissibly vague and fails to charge the essential facts as required by Rule 7(c), F.R.C.P., and further is a deliberate failure to present the Grand Jury with exculpatory information regarding the regulated character of the airline industry and the limited reach of the Sherman Act; such failure having the effect of misleading the grand jury and depriving it of its independence.

6. The Government's use before the second grand jury of their attorneys' own unsworn summaries and paraphrases of testimony presented by witnesses who appeared only before the first grand jury, violated the rules of this Court; unfairly manipulated the grand jury, deprived it of its independence, and tainted the indictment.

7. Burton S. Kolko, former chief of the CAB Agreements Division was ethically barred from accepting employment with the Anti-Trust Division and from accepting assignment to conduct grand jury proceedings in this case concerning the same matters he had considered and decided at the CAB, and on which he had recommended official decisions to the CAB. He was ineligible to participate in the grand jury proceedings in any capacity, was an unauthorized person before the grand jury, and his appearance in the grand jury room vitiates the indictment.

The first four grounds relate to jurisdictional objections to the prosecution. As set forth in the briefs and argued, they interpose statutory, constitutional and decisional reasons why the conduct complained of by the Government is not subject to criminal prosecution. These jurisdictional challenges are most directly presented by the defendants' reliance upon Section 414 of the Federal Aviation Act which expressly relieves from the operation of the anti-trust laws "any person affected by any order made under Sections 1378, 1379, or 1382" of Title 49, United States Code. Thus, the Federal Aviation Act undertakes to immunize carriers from actions or conduct which were it not for such protection would be subject to the impact of the Sherman Act and the attendant consequences of violation thereof. 1 The exemption thus afforded interstate air carriers enables them with impunity to enter into interline agreements which may in effect injure an intrastate

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carrier such as Southwest, or conceivably put it out of business. This statute has been the subject of numerous decisions, 2 and its validity is in nowise under attack. Whether the exemption it affords may be excessively broad is a matter solely for congressional review. 3 Whether the actions of the defendants as charged in the indictment are each and all cloaked with the statutory immunity is hotly disputed. 4

It becomes unnecessary, however, to further pursue this and the other jurisdictional attacks upon the indictment, as it is quite clear that it must be stricken due to impermissible conduct engaged in by the prosecution staff.

Mr. Burton S. Kolko was Chief of the Agreements Division of the Civil Aeronautics Board during all of the time when the allegedly illegal actions of the defendants were taking place. Among his duties was to examine, pass upon, approve or disapprove and make recommendations of all intercarrier agreements which were submitted to the CAB for its approval as required by law. Agreements which under the Government's point of view were part and parcel of the alleged conspiracy to injure Southwest were directly considered by Mr. Kolko and his staff, and reports thereon made to the Board. About the time that the second grand jury investigation of the defendants' activities was about to begin, Mr. Kolko left the employ of the CAB and became an employee of the anti-trust division for what he has stated as personal reasons to enhance his legal career. He was sworn in as a member of that staff, and almost immediately thereafter on April 10, 1974 Thomas E. Kauper, Assistant Attorney General in charge of the anti-trust division directed him by letter to proceed to this District to assist and prosecute in the on-going investigation of air transportation, including grand jury proceedings. Upon reaching San Antonio Mr. Kolko filed this letter with the Clerk of Court and executed the required oath of office. Thereafter, he spent the greater part of three days in the grand jury room while proceedings were under way to present this second grand jury with the Government's evidence. According to Mr. Kolko, he was present as an "observer", during which he did not participate in the case. He stated that his assignment to the San Antonio Grand Jury proceedings was to acquaint him with grand jury procedure of which he was totally unfamiliar, in order that he might undertake the presentation of a case to a California grand jury. Nevertheless, the Assistant Attorney General in commissioning Mr. Kolko to attend upon this San Antonio grand jury expressly directed him to assist in the investigation and prosecution of all proceedings growing out of those proceedings involving defendants. As such it is reasonable to expect that these prosecutorial duties would be carried out as specified. The law makes no provision for an "observer" in a grand jury room. So, if in fact, as Mr. Kolko and the anti-trust staff assert, he was present in the capacity of an observer, he was an unauthorized person. The Fifth Circuit has held that the participation of an unauthorized person in an investigation before a grand jury is unlawful, whether that participation be great or small; that it is not necessary that it be corrupt, or that unfair means were used. Latham v. United States, 226 F. 420, 424 (5 Cir. 1915). The very presence of an unauthorized person is

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condemned and is held ground per se for abating the indictment without proof of actual prejudice. United States v. Amazon Industrial Chemical Corp., 55 F.2d 254, 261-262 (D.Md.1931). As stated in the earlier case of United States v. Edgerton, 80 F. 374 (D.Mont.1897), no inquiry is required into the effect of the presence of such an ineligible person. In United States v. Borys, 169 F.Supp. 366, 367 (D.Alaska 1959), the rule is that the appearance of an unauthorized person is a sufficient ground for setting aside an indictment without a showing of prejudice. As stated by one court, United States v. Bowdach, 324 F.Supp. 123, 124 (S.D.Fla.1971), it is a hard and fast rule which allows for no exceptions.

This Court, however, in the instant cause is presented with additional reasons for application of the rule against unauthorized persons. Although there may have been no intention of wrong-doing, it is indeed...

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