American Airlines v. Civil Aeronautics Board

• Decision Date: 08 December 1949
• Docket Number: No. 9739.,9739.
• Citation: 178 F.2d 903
• Parties: AMERICAN AIRLINES, Inc., et al. v. CIVIL AERONAUTICS BOARD.
• Court: U.S. Court of Appeals — Seventh Circuit

178 F.2d 903 (1949)

AMERICAN AIRLINES, Inc., et al. v. CIVIL AERONAUTICS BOARD.

No. 9739.

United States Court of Appeals Seventh Circuit.

December 8, 1949.

Paul M. Godehn, John T. Lorch, Chicago, Ill., Henry L. Hill, Chicago, Ill. (Mayer, Meyer, Austrian & Platt, Chicago, Ill., of counsel), for petitioners.

Emory T. Nunneley, Jr., Greer M. Murphy, Warren L. Sharfman, Washington, D. C., Edward Dumbauld, William D. McFarlane, Department of Justice, Washington, D. C., Hardy K. Maclay, Washington, D. C., Charles P. Taft, Cincinnati, Ohio, Richard Bentley, Kenneth B. Hawkins, Richard H. Merrick, Chicago, Ill. (Headley Taft & Headley, Cincinnati, Ohio, Cassels, Potter & Bentley, Chicago, Ill., Landis, Gewirtz & Maclay, Washington, D. C., of counsel), for intervenor Air Freight Forwarders Ass'n.

C. J. Burrill, E. C. Riordan, Chicago, Ill. (Haskins, Maguire & Haskins, Chicago, Ill., of counsel), for intervener International Forwarding Co.

Homer S. Carpenter, Washington, D. C., Gregory A. Gelderman, Chicago, Ill. (Turney, Carpenter & Turney, Washington, D. C., of counsel), for intervener Acme Air Express, Inc.

Before DUFFY, FINNEGAN and LINDLEY, Circuit Judges.

LINDLEY, Circuit Judge.

Petitioners seek to reverse an order of the Civil Aeronautics Board authorizing air freight forwarders to engage indirectly in interstate air transportation. They do not ask us to review the evidence but contend that the findings are insufficient to sustain the order and that the board has erroneously interpreted the law.

The suit had its inception in a consolidated proceeding known as the Air Freight Forwarder Case, where some 78 parties filed applications under the Civil Aeronautics Act, 49 U.S.C.A. § 401 et seq., requesting the board to issue either certificates of public convenience and necessity or exemption orders permitting them to engage in indirect air transportation as air freight forwarders. Air freight forwarders, who have become active but comparatively recently, procure shipments from shippers, assemble them and tender the consolidated lot gathered from the various shippers to an air carrier for transportation at a bulk rate which is lower than the rates collected by the forwarders from the shippers. The forwarder assumes the responsibility of a carrier, though he carries no merchandise himself but ships entirely by air in other carriers' airplanes. Upon arrival of the consolidated shipment at the airport of destination, the forwarder divides the bulk shipment and distributes the separate portions thereof to the individual consignees. The difference between the high rates collected by forwarders and the low rates paid by them to carriers is commonly spoken of as the "spread" and provides the forwarder with expenses and profits.

When the applications were filed, petitioners, consisting of permanently certified air carriers, engaged directly in transportation of persons, property and mail by air within the United States, having intervened, opposed them. After hearing and recommendation by the examiner, the board, on September 8, 1948, entered the order now on review.

In order properly to understand the order and its scope and significance, it is essential that we examine the statutory law involved. Section 401(a) of the Civil Aeronautics Act of 1938, 49 U.S.C.A. §§ 401, 481, provides that no air carrier shall engage in air transportation unless a certificate issued by the board authorizes such service. Section 401(d) provides that: "The Board shall issue a certificate authorizing the whole or any part of the transportation covered by the application, if it finds that the applicant is fit, willing, and able to perform such transportation properly, and to conform to the provisions of this Act and the rules, regulations, and requirements of the Board hereunder, and that such transportation is required by the public convenience and necessity; otherwise such application shall be denied."

Air freight forwarders, as we have seen, do not carry anything by air. They are classed as air carriers because they are included in the definition of that term in Section 1(2) of the Act, the pertinent portion of which follows: "`Air carrier' means any citizen of the United States who undertakes, whether directly or indirectly or by a lease or any other arrangement, to engage in air transportation: Provided, That the Board may by order relieve air carriers who are not directly engaged in the operation of aircraft in air transportation from the provisions of this Act to the extent and for such periods as may be in the public interest."

The board denied the applications for certificate of convenience and necessity but concluded that the forwarders, as indirect carriers, should be relieved from the provisions of the Act, adopted a regulation covering allowance of applications for air freight forwarders and directed that the 58 applicants be permitted to operate under exemption upon complying with the terms of the regulation. The board denied relief to such of the applicants as had abandoned their application during the progress of the proceedings and such of them as sought international rights and those directly or indirectly controlled by railroad interests. It made no finding that the applicants exempted were fit, willing and able to furnish public service as forwarders or that their operations were required by the public convenience and necessity; and it is largely upon this lack of finding that petitioners ground their objections to the order.

In other words, it is insisted by petitioners that the failure to make a finding that the applicants were fit, willing and able to perform transportation properly and that such transportation was required by the public's convenience and necessity as provided in Section 401(d) of the Act is a fatal defect. However, it is provided in Section 1(2) of the Act that the board may by order exempt air carriers who are not directly engaged in the operation of aircraft "to the extent and for such periods as may be in the public interest," and the board found that it was in the public interest to relieve such carriers from the provisions of the Act to the extent and for the period fixed. Our question then is whether, when the board enters upon a determination of whether it will grant exemption to an indirect carrier, that is, whether it will relieve the indirect carrier from the other provisions of the Act as provided in Section 1(2), it is necessary for the board to follow the standards of Section 401 under which, before authorizing the carrier to act, it must find that the applicant is fit, willing and able and that its operation is in the public interest. If the board was not bound to adhere to that standard and if it had a right under the statute, in the exercise of its discretion, to excuse indirect carriers, that is, those who do not engage directly in air operations, from the requirements of the Act, then its order was proper.

We think petitioners are over-meticulous in their conception of the standard fixed by the statute. These forwarders do not engage in air transportation; they merely gather freight on the ground, assemble it, deliver it so assembled to the carrier for shipment, then, after shipment has ended, divide it and deliver it to the several consignees. All their activities are on the ground. The board found that their operations tend to help the direct air carriers by increasing the volume of air transportation and are, therefore, of benefit to petitioners. The board reasoned that, inasmuch as the applicants were in the unique position of being subject to the Act as indirect carriers but performed no function in the air and, inasmuch as they were comparatively recent newcomers in the industry, there was insufficient evidence to show that their operations were such that they should have certificates under Section 401, that is, certificates of convenience and necessity, but that, in view of their limited activities, they should have certificates of exemption from any requirement of the Act, limited in time.

We think the order did not contravene the purpose of the statute but rather carried it into effect. Apparently Congress contemplated that for all kinds of carriers there should be two methods by which operations could be authorized; first, for all operations, certificates of convenience and necessity might issue; second, for indirect operations, certificates of exemption might issue. The plain reading of the statute impels this conclusion. It is unambiguous and, when properly construed, its language leads only to this one conclusion. Section 401 clearly requires the board, before issuing a certificate, to find that the transportation authorized is required by the public's convenience and necessity and that the applicant is fit, willing and able; but the proviso of Section 1(2), just as clearly fails to include any such requirements and authorizes the board to issue relief or exemption orders for indirect carriers "to the extent and for such periods as may be in the public interest." The first section is concerned with the necessity or convenience demanding air transportation service and the second, with the advisability of relieving indirect carriers of the obligation of proving such necessity. We agree with the board that if the test for determining whether an indirect carrier should be relieved of the obligation of proving necessity is to require proof of necessity in every case, it would completely nullify the purpose of Congress as expressed in Section 1(2). As said in Cox v. Hart, 260 U.S. 427, 435, 43 S.Ct. 154, 157, 67 L.Ed. 332: "The office of a proviso is well understood. It is to except something from the operative effect, or to qualify or restrain the generality, of the substantive enactment to which it is attached." "If possible, the act is to be given such construction as will permit both the enacting clause and the proviso to stand and be construed together...