Moss v. CAB
| Citation | 430 F.2d 891 |
| Decision Date | 09 July 1970 |
| Docket Number | No. 23627.,23627. |
| Parties | John E. MOSS et al., Petitioners, v. CIVIL AERONAUTICS BOARD, Respondent, American Airlines, Inc., Eastern Air Lines, Inc., Continental Air Lines, Inc., North Central Airlines, Inc., Mohawk Airlines, Inc., Braniff Airways, Inc., Northwest Airlines, Inc., Trans World Airlines, Inc., Intervenors. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Mr. Stanford G. Ross, Washington, D. C., with whom Mr. H. David Rosenbloom, Washington, D. C., was on the brief, for petitioners.
Mr. Warren L. Sharfman, Associate General Counsel, Litigation and Research, Civil Aeronautics Board, with whom Messrs. Joseph B. Goldman, General Counsel at the time the brief was filed, and O. D. Ozment, Deputy General Counsel, Civil Aeronautics Board, and Howard E. Shapiro, Attorney, Department of Justice, were on the brief, for respondent.
Mr. Alfred V. J. Prather, Washington, D. C., for intervenors American Airlines, Inc., Eastern Air Lines, Inc., Northwest Airlines, Inc. and Trans World Airlines, Inc. Mr. J. William Doolittle, Washington, D. C., also entered an appearance for intervenor American Airlines, Inc.
Mr. Philip A. Fleming, Washington, D. C., entered an appearance for intervenor Eastern Air Lines, Inc.
Messrs. Thomas D. Finney, Jr. and Lee M. Hydeman, Washington, D. C., entered appearances for intervenor Continental Air Lines, Inc.
Messrs. Russell A. Garman, Jr. and Raymond J. Rasenberger, Washington, D. C., entered appearances for intervenors North Central Airlines, Inc. and Mohawk Airlines, Inc.
Mr. B. Howell Hill, Washington, D. C., entered an appearance for intervenor Braniff Airways, Inc.
Mr. James M. Verner, Washington, D. C., entered an appearance for intervenor Northwest Airlines, Inc.
Mr. Ulrich V. Hoffman, New York City, entered an appearance for intervenor Trans World Airlines, Inc.
Before WRIGHT, McGOWAN and ROBINSON, Circuit Judges.
This appeal presents the recurring question which has plagued public regulation of industry: whether the regulatory agency is unduly oriented toward the interests of the industry it is designed to regulate, rather than the public interest it is designed to protect. Petitioners, some 32 congressmen, alleged that the Civil Aeronautics Board, in considering the lawfulness of increases in domestic passenger fares filed by all the major air lines, excluded the public from ex parte meetings with representatives of the air line industry and then held a pro forma hearing limited to oral argument, as a result of which changes in the fare structure resulting in a six per cent rise in domestic fares were unlawfully approved. The Board admits the ex parte meetings, denies that the hearing was pro forma, and admits that, without complying with the statutory procedural requirements and criteria for rate-making by the Board, it approved in advance the filing without suspension of air line tariffs providing for a six per cent increase in air line revenues from passenger fares.1 We hold that the procedure used by the Board is contrary to the statutory rate-making plan in that it fences the public out of the rate-making process and tends to frustrate judicial review.
The statutory plan is relatively simple. Air line passenger rates can be made by the carrier or by the Board.2 However made, the rates must be included in a tariff filed with the Board by the carrier.3 It is unlawful for the carrier to charge a rate other than the existing one on file.4 On complaint or on its own initiative, the Board may change an existing rate after public notice and hearing.5 The Board need not indicate a specific rate; it may simply fix a maximum or minimum or both.6 In determining and prescribing a rate the Board must take into consideration, among other factors, five statutory criteria.7
An air line carrier may change the existing rate by filing a new tariff with the Board indicating the new rate.8 Under the statute, on complaint or on its own initiative the Board, by giving the carrier a statement of its reasons, may suspend the new rate for a period not to exceed 180 days while conducting an investigation as to its lawfulness.9 After investigation and hearing, the Board may determine and prescribe the lawful rate, in accordance, of course, with the rate-making provisions of Sections 1002(d) and 1002(e) of the Federal Aviation Act.10
Petitioners had complained to the Board on prior occasions both about the Board's practice of holding ex parte,11 informal meetings with the carriers concerning their need for increased fares, and about the Board's lack of standards for testing the reasonableness of fares. In spite of these complaints, the informal sessions between carriers and Board members continued into the summer of 1969. In early August of 1969, following the lead of United Air Lines, the carriers filed increased passenger tariffs with the Board. While these proposed rate increases were pending before the Board, another ex parte meeting between the air line officials and members of the Board was scheduled for August 14, 1969. Petitioner Moss requested and was refused permission to attend this meeting.12 Following the ex parte meeting on August 14, the Board issued an order calling for oral argument on the advisability of exercising its power to investigate and suspend the new rates before they went into effect. There was no suggestion in the order that the Board might promulgate its own fare formula.13 Petitioners renewed their complaints about the Board's continued ex parte meeting and rate practices and urged the Board to suspend the tariffs, to institute a general passenger fare investigation to define more clearly the statutory rate-making standards, and finally to set reasonable rates based on these more precise standards. Petitioners, however, refused to participate in the oral argument on the ground that the Board's decision on the rate increases had already been made.
On September 12, 1969, eight days after the oral argument, the Board issued its order.14 In that order the Board found that the proposed tariffs on file "may be unjust or unreasonable"15 and ordered the tariffs suspended and investigated, as it is authorized to do by Section 1002(g) of the Federal Aviation Act.16 Still purporting to act in accordance with its suspension authority, however, the Board went further. It found that the carriers had demonstrated a need for "some additional revenue"17 because of greatly increased costs, and decided that a limited fare increase was necessary in order to maintain the financial vitality of the carriers as a group.18 Accordingly, in the same order which suspended the rates proposed by the carriers, the Board outlined its own fare formula and announced its decision to "permit tariff filings implementing" that formula to be filed without suspension,19 thus assuring almost immediate effectiveness.
The carriers promptly withdrew their previous filings and filed for new increases based on the Board's model. Petitioners, in an application for reconsideration of the September 12 order, opposed the new filings and requested their suspension and investigation. On September 30, 1969, the application was denied and the fares based upon the Board formula were allowed to stand without suspension or investigation.20 The instant petition for review of both the September 12 and the September 30 orders followed.
The question presented by this appeal is whether the Board should have followed the procedures and standards established by Sections 1002(d) and 1002 (e) of the Act before proposing the rate schedule it set forth in its September 12 order. Petitioners complain that the Board effectively "determined" rates, within the meaning of Sections 1002(d) and 1002(e), to be charged by the air carriers without proper notice and hearings as required by Section 1002(d) and without taking into account the rate-making factors enumerated in Section 1002(e).21 The Board admits that it would have been required to act in accordance with subsections (d) and (e) if its actions amounted to the making of rates. The Board, however, contends that it was not required to adhere to the standards of subsections (d) and (e) because, as the formal title of its September 12 order ("Order of Investigation and Suspension") indicates, it was not determining rates but only exercising its power under Section 1002(g) to suspend, pending a more complete investigation, the rates initially filed by the carriers in August.
The Board also admits that immediately after its September 12 order the air lines withdrew their August tariffs and filed new tariffs listing rates based directly on and in conformity with that order. But the Board disclaims any legal responsibility for the rates listed in the carriers' September tariffs. According to the Board, the detailed outline of the rate structure which it "proposed to accept" in its September 12 order was not an attempt to prescribe or determine rates for the future within the meaning of the statute, but merely served to explain to the carriers — as required by the statute22 — the Board's reasons for suspending the August filings. The Board points out that the carriers were not legally bound by the September 12 order of the Board to file a new tariff and list rates based on its formula. Therefore, the Board argues, even though the carriers did precisely what the Board indicated in its September 12 order should be done, the resulting rates are carrier-made rates for which the Board is not to be held accountable.
This legalistic reading of the statute is supposedly supported by the Supreme Court's decision in Arizona Grocery Co. v. Atchison, Topeka & Santa Fe Railway Co.23 and its progeny. We find no support in Arizona Grocery for the Board's position. For that case referred to agency-made rates as those which had been legislatively prescribed as "a maximum...
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