WR Grace & Co. v. Civil Aeronautics Board

Decision Date21 February 1946
Docket NumberNo. 92.,92.
Citation154 F.2d 271
CourtU.S. Court of Appeals — Second Circuit
PartiesW. R. GRACE & CO. v. CIVIL AERONAUTICS BOARD et al.

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Cahill, Gordon, Zachry & Reindel, of New York City (John T. Cahill, Fred J. Knauer, Elmer J. Kelsey, and William F. Kennedy, all of New York City, of counsel), for petitioner.

Wendell Berge and George C. Neal, both of Washington, D. C. (James E. Kilday, of Washington D. C., Lawrence S. Apsey, of New York City, Edward Dumbauld and John H. Wanner, both of Washington, D. C., and Louis W. Goodkind, of New York City, of counsel), for Civil Aeronautics Board.

Root, Clark, Buckner & Ballantine, of New York City (Henry J. Friendly, James P. Kranz, Jr., and John P. Apicella, all of New York City, of counsel), for Pan American Airways Corporation.

Gambrell & White, of Atlanta, Ga. (E. Smythe Gambrell, W. Glen Harlan, and Harold L. Russell, all of Atlanta, Ga., of counsel), for Eastern Air Lines, Inc.

Before L. HAND, SWAN, and FRANK, Circuit Judges.

FRANK, Circuit Judge.

1. It has been suggested that the Board should have considered and decided the issue of the violation of Section 411 by treating the proceeding as if it involved Grace's petition No. 744.2 But the scope of this proceeding (No. 779) is to be measured, we think, by the directory part of the Board's order of September 10, 1942; not by its recitals, save as these may be necessary to throw light upon the rest; nor by what the parties said in their arguments and briefs, or in the course of the hearings. Of course, we do not mean that the order finally fixed the issues; but we think it did so in the absence of some amendment plainly intended to change them. Turning then to the order, the proceeding was "to determine whether the public convenience and necessity require that the certificate of public convenience and necessity of Panagra should be altered." The proceeding was therefore under § 401 (h); and such we think it remained throughout, for the recital about No. 744 served no further purpose than to allege that the Pan American Company was preventing Panagra from itself making the application. It would be too much to say that the Board treated the proceeding as a continuation of No. 707. But it came nearly to the same thing after Grace & Company had been cited in, and Pan American had been made a party by intervention, for No. 707 had also been addressed to the same issue of "public convenience and necessity." The Board never carried through this purpose: eventually it felt itself foreclosed, because it did not treat Panagra as an applicant for the extension, and that limited the inquiry to whether the facts justified forcing such an extension upon an unwilling carrier. Once the Board had decided that they did not, it became impossible to go on with the original issue of public convenience and necessity; and the proceeding necessarily came to an abortive end. We will assume for argument that the Board was right in its holding, if Panagra was to be regarded as an unwilling carrier, and if therefore the only issue was whether the proposed extension could be forced upon it. That was indeed an issue with which the Board was peculiarly qualified to deal, and the new competition which the extension would invite — to say nothing of its expense — may well have put the extension outside those additional burdens which a licensee impliedly accepts as part of the control to which his rights are in any event subject. Unless therefore it was within the power of the Board to inquire into the right of Grace & Company to speak for Panagra, and by doing so to make the application a voluntary one, it may well be that the order was right. If on the other hand the Board had power to make that inquiry, it could have pressed the proceeding to a conclusion along the lines on which it had been initiated, and we think that this is what it should have done.

In Pittsburgh, etc., R. Co. v. United States, 281 U.S. 479, 50 S.Ct. 378, 74 L.Ed. 980, the Supreme Court held that, in reviewing an order of the Interstate Commerce Commission, the court might not examine whether the majority shareholders of a railroad, a party to the proceeding, were abusing their power in taking the position in the proceeding which they did. Such an inquiry was to be reserved for a separate suit, and could not be interjected into the controversy before the Commission. In spite of some differences which we will point out, we might feel that decision conclusive here, were it not for the decision in American Power & Light Co. v. Securities and Exchange Commission, 325 U.S. 385, 65 S.Ct. 1254; particularly that part of it which dealt with Okin's appeal. Okin, the court said, had no interest in the proceeding before the Commission different from any other shareholder's; he could speak only for his class and his claim was therefore necessarily derivative. Since he was allowed to appeal, we can see no escape from concluding that he had a standing to assert a right of the Electric Bond & Share Company.3 If he had not, he had no standing at all — unlike the American Power & Light Company, which had an individual grievance. His power so to speak for the company depended upon his allegation that the action of the directors was actuated by "illegality and fraud" (325 U.S. at page 392, 65 S.Ct. at page 1257) which made futile any recourse to the management. In accord with this, it seems to us that, if Grace & Company could prove that the opposition of Pan American (the parent company, for we disregard the subsidiary) to Panagra's applying for an extension was due to "illegality and fraud," it would follow that this proceeding should be regarded as a voluntary application for the extension; and then it would be open to the Board to decide the issue of public convenience and necessity.4 Certainly there is everything to be said in favor of such a course, if it is possible. To await the outcome of a suit brought in a court to direct Panagra to apply for the extension, would be at best dilatory and vexatious, and there are other and more important reasons against it.

The issues, upon which such a shareholder's suit would depend, would be whether the Pan American Company was opposing the extension because it was pursuing its own advantage to the prejudice of the joint interest ("fraud"), and because it was engaging in some unfair trade practice ("illegality"). Both those issues demand the same specialized acquaintance with commercial aviation and its ramifications as a decision upon the public convenience and necessity of the extension itself. No court, state or federal, would have that acquaintance; by hypothesis the Board does have it, and the Board alone. To remove the decision from the Board, not only duplicates the time and labor, but subjects the result to the final determination of a relatively incompetent tribunal; for, if the court should decide that the Pan American Company's refusal was neither oppressive, nor unlawful, there would be an end of this proceeding, and of No. 707. It might, however, still be possible for the Board under § 411 to order the Pan American Company to "cease and desist" from any unfair trade practices in which the Board — differing from the Court — might think it engaged; but surely such a conflict between court and Board would be to the last degree undesirable, regardless of the possible insufficiency of the available remedies. For these reasons it seems to us that in this proceeding the Board had power to determine, as between Grace & Company and the Pan American Company, which should speak for Panagra. Needless to say, we suggest nothing as to the proper outcome of that inquiry.

There remains only the question whether the Board would be justified in refusing to introduce that controversy into this proceeding, and in reserving it for either No. 707 or No. 744. In the first place it does not appear that, if the Board had believed the power to exist, it would have refused to press the proceeding to a conclusion; but, even if it would have refused, we should not concur. True, the Board must have very wide latitude in deciding in what order to take up the issues in any litigation (Federal Communications Commission v. Pottsville Broadcasting Co., 309 U.S. 134, 60 S.Ct. 437, 84 L.Ed. 656); but Ashbacker Radio Corporation v. Federal Communications Commission, 326 U.S. 327, 66 S.Ct. 148, decided that there may be practical reasons for not determining part of an indivisible controversy in advance, even though the first decision will not be conclusive. In the case at bar more than four thousand pages of evidence had been taken and the record was complete, before the Board finally decided the motion which had been pending from the outset. It may prove possible in a separate hearing later to be called in No. 707 to introduce the evidence so taken; but we can see no conceivable reason, except a defect of power, for adopting so futile and dilatory a course.5 Arguendo, one might even agree that it might have been convenient in limine to decide whether the extension could be forced upon Panagra in invitum, reserving the trial of any other issues. But to frustrate the whole undertaking when it lay ripe for final conclusion was, we think, beyond even that generous latitude which must be accorded to the Board's discretion. Hence we conclude that the Board should be directed to decide whether Panagra should be treated as applying for the extension; and if that turns out to be true, whether the public convenience and necessity require the extension to be granted. These two issues being intricately intermeshed, as we have said, we do not mean that they should be decided seriatim. Logically, indeed, they do arise...

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    ...this country in those formative years.' 193 F.Supp. 18, 34. 5. See Panagra Terminal Investigation, 4 C.A.B. 670, remanded W. R. Grace & Co. v. C.A.B., 154 F.2d 271. We granted certiorari, 328 U.S. 832, 66 S.Ct. 1378, 90 L.Ed. 1608, and later dismissed the case as moot, 332 U.S. 827, 68 S.Ct......
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    ...rights against the parent, performance of which might have averted the conditions now requiring abandonment, cf. W. R. Grace & Co. v. CAB, 154 F.2d 271 (2 Cir.), cert. granted sub nom. Pan American Airways Corp. v. W. R. Grace & Co., 328 U.S. 832, 66 S.Ct. 1378, 90 L.Ed. 1608 (1946), dismis......
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