Air Line Pilots Ass'n, Intern. v. Department of Transp.

• Decision Date: 16 May 1986
• Docket Number: No. 85-1178,85-1178
• Citation: 791 F.2d 172
• Parties: 122 L.R.R.M. (BNA) 2757, 253 U.S.App.D.C. 1 AIR LINE PILOTS ASSOCIATION, INTERNATIONAL, Petitioner, v. DEPARTMENT OF TRANSPORTATION, Respondent, Trans International Airlines, Inc., Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 172

791 F.2d 172

122 L.R.R.M. (BNA) 2757, 253 U.S.App.D.C. 1

AIR LINE PILOTS ASSOCIATION, INTERNATIONAL, Petitioner, v. DEPARTMENT OF TRANSPORTATION, Respondent Trans International Airlines, Inc., Intervenor.

No. 85-1178.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 12, 1986.

Decided May 16, 1986.

Gary Green, with whom Sarah Perry Fleischer, Washington, D.C., was on brief, for petitioner.

Thomas L. Ray, Atty., Dept. of Transp., with whom Kenneth N. Weinstein, Deputy Asst. Gen. Counsel, Dept. of Transp., John J. Powers, III and George Edelstein, Attys., Dept. of Justice, Washington, D.C., were on brief, for respondent.

Jeffrey A. Manley, Washington, D.C., for intervenor, Trans Intern. Airlines, Inc.

Before ROBINSON, Chief Judge, and MIKVA and SILBERMAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

The petitioner union, Air Line Pilots Association (ALPA), represents pilots employed by Transamerica Airlines. ALPA challenges two orders of the Civil Aeronautics Board approving a transaction by which Transamerica's holding company acquired control of an inactive carrier, the intervenor Central American International, Inc. (since renamed Trans International Airlines, Inc.). ALPA contends that the Board abused its discretion and acted arbitrarily and capriciously in refusing to condition its approval of the acquisition on the imposition of labor protective provisions (LPP's), and in refusing to hold an evidentiary hearing on that issue. Because we find that the orders under review embody a satisfactory explanation of the Board's new policy governing LPP's and that that policy is consistent with the Board's statutory mandate, we reject ALPA's substantive challenge. Moreover, because the Board reasonably determined that ALPA did not make a credible showing that it could introduce evidence meeting the Board's new standard, we also conclude that the Board did not err in denying ALPA a hearing.

I.

In the Airline Deregulation Act of 1978, Pub.L. No. 95-504, 92 Stat. 1705, Congress drastically reduced its regulation of air carriers. Nevertheless, Congress retained several salient features of the preexisting regulatory regime. Under what is now Section 408(b) of the Federal Aviation Act, 49 U.S.C. App. Sec. 1378(b) (1982), the Civil Aeronautics Board ¹ reviews airline mergers and acquisitions under a "public interest" standard. The Act specifically prohibits approval of transactions raising certain enumerated antitrust concerns. See id. Sec. 1378(b)(1)(A)-(B). Otherwise, however, the Board is granted broad discretion to advance its view of the public interest, informed only by the general purposes of the Act and by a non-exhaustive list of public-interest factors located elsewhere in the statute. See id. Sec. 1302. Moreover, the Board is empowered to grant its approval of such transactions "upon such terms and conditions as it shall find to be just and reasonable...." Id. Sec. 1378(b). For many years, the Board had followed this public interest mandate by conditioning approval of mergers and acquisitions upon the carrier's acceptance of LPP's such as displacement compensation and seniority rights. See Braniff Master Executive Council v. CAB, 693 F.2d 220, 222-23 (D.C.Cir.1982), and cases cited therein.

In March 1984, Transamerica's holding company sought the Board's approval of its acquisition of Central American International, Inc., an inactive carrier (with no employees) that held certificates entitling it to provide all-cargo air services and charter air transportation. Transamerica's plan was to transform the acquired company (renamed Trans International Airlines) into a low-cost air carrier; among other things, the application indicated that the new carrier would not be bound by Transamerica's existing labor contracts. The Board issued an order to show cause why Transamerica's application should not be approved. ALPA opposed the application, contending, inter alia, that the acquisition should be conditioned upon the imposition of LPP's. ² Following a policy announced in several recent cases, ³ however, the Board declared that it would insist upon LPP's only in situations in which it was apparent that labor strife threatening a systemwide disruption of the nation's airways would otherwise result. The Board concluded that ALPA's proffer of evidence in opposition to the application failed to raise a genuine dispute over whether Transamerica's acquisition would spur labor strife of national scope, and accordingly denied ALPA's demand for LPP's without a hearing. The Board thus approved Transamerica's application as consistent with the public interest (two members dissenting in part). ALPA's request for reconsideration was denied, and it filed this petition for review of the Board's orders pursuant to 49 U.S.C.App. Sec. 1486 (1982).

II.

In recent years, the Board has altered its approach to the imposition of LPP's in the merger and acquisition context. Whereas over the past few decades the Board had quite routinely conditioned its approval of these transactions on the carrier's acceptance of labor protective terms, the Board's new policy calls for such conditioning only when it appears necessary to avoid labor strife capable of causing systemwide disruption of the nation's airways. In light of the Board's policy shift, the petitioner suggests that this case is governed by the standards of Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). In State Farm, the Supreme Court instructed that an agency's departure from a longstanding policy implementing the agency's statutory mandate should be carefully scrutinized by a reviewing court. Id. at 40-42, 103 S.Ct. at 2865-66. The Court adverted to a "presumption" that an agency's "settled course of behavior" would best advance the objectives of the statute it administers. Id. at 41-42, 103 S.Ct. at 2865-66 (quoting Atchison, T. & S.F.R. Co. v. Wichita Bd. of Trade, 412 U.S. 800, 807-08, 93 S.Ct. 2367, 2375, 37 L.Ed.2d 350 (1973)). See also International Bhd. of Teamsters v. United States, 735 F.2d 1525, 1531-32 (D.C.Cir.1984); International Ladies' Garment Workers' Union v. Donovan, 722 F.2d 795, 812-14 (D.C.Cir.1983).

It seems to us, however, that this case is a far cry from State Farm. The agency's change in policy here came in response to Congress' change in the statute from which that policy derived. The Airline Deregulation Act of 1978 dramatically overhauled national aviation policy, rejecting the elaborate regulation of air carriers' business decisions that had traditionally marked that policy in favor of enhanced reliance on competitive market forces. Thus, any "presumption" that an agency's existing policies best maintain fidelity to congressional intent simply has no application here. Given the modification of its statutory charter, it is hardly surprising that the Board reconsidered its longstanding policy governing the standards by which it approves mergers and acquisitions. ⁴ Although the Airline Deregulation Act preserved the Board's jurisdiction to review these transactions for consistency with the "public interest," see 49 U.S.C.App. Sec. 1378(b)(1) (1982), ⁵ it is apparent that Congress did not thereby mean to preserve the gloss previously placed upon that standard. The Conference Report accompanying the Act states:

The "public interest" standard in section 408(b) of the Federal Aviation Act of 1958 is retained in the new section, but that standard must now be interpreted in light of the intent of Congress to move the airline industry rapidly toward deregulation. The foundation of the new airline legislation is that it is in the public interest to allow the airline industry to be governed by the forces of the marketplace.

H.R.Rep. No. 1779, 95th Cong., 2d Sess. 73 (1978), U.S.Code Cong. & Admin.News 1978, pp. 3737, 3789.

In articulating its new policy, the Board maintained that routine resort to LPP's in the merger and acquisition context no longer makes sense in a deregulated era. The Board suggested that approval of transactions such as the present one would further the purposes of the Airline Deregulation Act by facilitating the creation of new low-cost carriers; in its view, the Act directed it "to promote entry by lower cost, more efficient carriers, which may spur the incumbents to operate more efficiently." CAB Order 84-7-60, at 13 (July 19, 1984). The Board indicated that labor protective conditions, which presumably raise the costs of such transactions, are justifiable primarily as a safeguard against labor strife disruptive of the air transportation system. In the past, an era characterized by strict controls upon carrier services and limits upon the entry of new carriers, a strike by employees of a single carrier had been regarded as a potential threat to the entire air transportation network. By contrast, the Board reasoned, "in a deregulated era of freer entry, other carriers can now respond to provide the air transportation services of the struck carriers." Id. at 12 (July 19, 1984). Thus, the Board saw no urgent need to intervene into carrier mergers and reorganizations to preclude the possibility of a strike. Finally, the Board suggested that any adverse effects upon the incumbent carriers' employees that such transactions might occasion could be mitigated through the collective bargaining process. The Board observed in this regard that the employees of other carriers who had recently entered similar transactions had successfully bargained with their employers for various labor protections.

We believe that the Board's orders at issue survive the limited scrutiny appropriate under the arbitrary and capricious standard of review. In this proceeding, the Board "articulate[d] a satisfactory explanation for its action including a 'rational connection between the facts found and the...