C. A. B. v. United Airlines, Inc.

• Citation: 542 F.2d 394
• Decision Date: 23 September 1976
• Docket Number: No. 75-2116,75-2116
• Parties: CIVIL AERONAUTICS BOARD, Plaintiff-Appellant, v. UNITED AIRLINES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 394

542 F.2d 394

CIVIL AERONAUTICS BOARD, Plaintiff-Appellant, v. UNITED AIRLINES, INC., Defendant-Appellee.

No. 75-2116.

United States Court of Appeals Seventh Circuit.

Argued April 14, 1976.

Decided Sept. 23, 1976.

Samuel K. Skinner, U. S. Atty., Chicago, Ill., Ronald R. Glancz, Dept. of Justice, Civ. Div., App. Section, Washington, D. C., Thomas F. McBride, Washington, D. C., for plaintiff-appellant.

H. Templeton Brown, Chicago, Ill., for defendant-appellee.

Before HASTINGS, Senior Circuit Judge, TONE, Circuit Judge, and NOLAND, District Judge. ^*

TONE, Circuit Judge.

In this appeal by the Civil Aeronautics Board we must decide whether § 407(e) of the Federal Aviation Act of 1958, as amended, 49 U.S.C. § 1377(e) (Supp. V, 1975), gives the Board inspection powers equivalent to a continuing general search warrant, as the Board contends. We hold that there are limits to the Board's inspection powers, and affirm the summary judgment entered by the District Court against the Board. 399 F.Supp. 1324 (N.D.Ill.1975).

The Federal Aviation Act of 1958, 49 U.S.C. § 1301, et seq., entrusts the Board with economic regulation of air carriers. In April 1975, authorized agents of the Board presented themselves at defendant United Airlines, Inc.'s executive offices in Elk Grove, Illinois, and requested immediate access to all records and documents located on the premises. This initial request was subsequently limited to include, for six different departments, United's: (1) reading files, which contain copies of all correspondence arranged in chronological order, (2) subject matter files, which contain correspondence, memoranda, studies, reports, etc., dealing with specific matters, (3) expense reports, which United has since agreed to provide, and (4) memoranda. The agents refused to disclose the subject of their investigation. When asked whether it was possible political campaign contributions, they said their investigation might include, but was not limited to, that subject. Eventually United offered to make available its records pertaining to political contributions, if that were the Board's area of interest, "as well as any other records specifically identified and pertinent to" the Board's investigation. It refused, however, the Board's request for plenary access to its files. Three days later the Board filed this suit seeking, pursuant to 49 U.S.C. § 1487 and 28 U.S.C. § 1345, to enjoin United's refusal to allow CAB agents "immediate and unconditional access to all lands, buildings and equipment of United, and accounts, memoranda, correspondence, records, reports and documents kept" by the carrier. The District Court, Judge Richard W. McLaren, granted United's motion for summary judgment.

Despite the unlimited inspection sought in the complaint, the District Court treated the Board's demand as limited to the records listed above, and those are the records the Board seeks before us. The Board's demand was further limited in this court to exclude records protected by the attorney-client privilege and certain files maintained by employees on United's premises but not relating to United's business and therefore actually not a part of United's records. ¹ None of these limitations, however, change the nature of the issue before us. The Board continues to claim the right to search several broad categories of the carrier's records without specifying a purpose and indeed without having any purpose, and it grounds this claim on the proposition that it is entitled to unlimited access to all the carrier's records, with the possible exception of documents subject to the attorney-client privilege.

1.

Section 407(e) of the Federal Aviation Act, 49 U.S.C. § 1377(e) (Supp. V, 1975), which the Board contends gives it unlimited inspection authority, provides as follows:

"The Board shall at all times have access to all lands, buildings, and equipment of any air carrier or foreign air carrier and to all accounts, records, and memorandums, including all documents, papers, and correspondence, now or hereafter existing, and kept or required to be kept by air carriers, foreign air carriers, or ticket agents and it may employ special agents or auditors, who shall have authority under the orders of the Board to inspect and examine any and all such lands, buildings, equipment, accounts, records, and memorandums. . . ."

Accounts, records, and memorandums "required to be kept," as well as those which may be "kept," are provided for in § 407(d), 49 U.S.C. § 1377(d), which states as follows:

"The Board shall prescribe the forms of any and all accounts, records, and memoranda to be kept by air carriers, including the accounts, records, and memoranda of the movement of traffic, as well as of the receipts and expenditures of money, and the length of time such accounts, records, and memoranda shall be preserved; and it shall be unlawful for air carriers to keep any accounts, records, or memoranda other than those prescribed or approved by the Board: Provided, That any air carrier may keep additional accounts, records, or memoranda, if they do not impair the integrity of the accounts, records, or memoranda prescribed or approved by the Board and do not constitute an undue financial burden on such air carrier."

In contrast to the Board's claim of plenary inspection authority, United's position is that the Board may inspect only those records which it has "required to be kept" and records voluntarily "kept" which support, explain, or relate to those required to be kept. This was the interpretation of the statute adopted by the District Court. 399 F.Supp. at 1328.

2.

The District Court's holding is supported by Burlington Northern, Inc. v. Interstate Commerce Commission, 149 U.S.App.D.C. 176, 462 F.2d 280, 287-288, rehearing en banc denied by an equally divided court, cert. denied, 409 U.S. 891, 93 S.Ct. 120, 34 L.Ed.2d 148 (1972). The narrow issue before the court in that case was whether the Commission could inspect the carrier's earnings forecasts. These documents were demanded by the Commission in connection with a request made to it by a Senate Subcommittee for financial forecasts of railroads that were "marginal and losing money" and thus candidates for loan guarantees. Although the Burlington Northern was not claimed to be "marginal" or "losing money," the panel did not rest its decision on the ground that the inquiry was not relevant to the investigative purpose, but on a narrow interpretation of the governing statute, § 20(5) of the Interstate Commerce Act, as amended, 49 U.S.C. § 20(5), which served as the model for the provisions of the Federal Aviation Act now before us. This interpretation was based upon the history of § 20, particularly its interpretation by the Supreme Court in United States v Louisville & Nashville R.R., 236 U.S. 318, 35 S.Ct. 363, 59 L.Ed. 598 (1915). In the Louisville & Nashville case the Court held that the grant to the Interstate Commerce Commission of authority to inspect accounts, records, and memoranda did not include the right to inspect correspondence. The right to inspection, reasoned the Court, was related to the purpose of § 20, which was to establish a uniform and reliable system of accounting. Id. at 335, 35 S.Ct. 363. If Congress had intended to authorize inspection of correspondence, it would have "used language adequate to that purpose" and would have excepted "some lines of correspondence," particularly that between the carrier and its attorneys. Id. at 336, 35 S.Ct. at 369. In Burlington Northern, the court pointed out that although Congress amended § 20 in 1920, ch. 91, 41 Stat. 456, 493, to include "correspondence" and other "documents" and "papers," thereby abrogating the specific holding of the Louisville & Nashville case,

"it did not alter the basic design and purpose of section 20 as interpreted by the Supreme Court. The investigatory powers exercised by the Commission under that section were still required to relate to the maintenance of a uniform system of accounts, and to the explanation or understanding of required accounting entries." 462 F.2d at 287.

Nor, said the court, did this basic design of § 20 change, so far as carriers were concerned, with the amendment made by the Transportation Act of 1940, ch. 722, 54 Stat. 898, 917. ² The court concluded from this history that its interpretation of § 20 should be governed by the Supreme Court's "narrow construction of the purpose of the section" in the Louisiana & Nashville case as being "to maintain a uniform accounting system and to permit the analysis and interpretation of records which are required to be kept by carriers." From this it followed that the Commission's access to the carrier's files was "confined to circumstances in which the need for information relating to or explanatory of required accounting and bookkeeping entries is evident." 462 F.2d at 287-288.

Judge Leventhal's statement, for himself and three other judges, of why they would have ordered rehearing en banc in Burlington Northern, observed first that the interpretation of § 20 in Louisville & Nashville served to avoid a constitutional problem (concerning the extent of the protection afforded corporate documents by the Fourth Amendment) since laid to rest in United States v. Morton Salt Co., 338 U.S. 632, 70 S.Ct. 357, 94 L.Ed. 401 (1950). He then argued that Congress' rejection of the Louisville & Nashville interpretation of § 20 in the 1920 amendments was broader in scope than the panel opinion indicated. Those amendments, he said, not only expressly include "all documents, papers, and correspondence" but, by the words "kept or required to be kept," made it clear that "s 20 governs documents that are 'kept.' " 462 F.2d at 289.

Judge Leventhal's opinion did not, however, argue that the agency had the plenary inspection powers the Board claims for itself in the case at bar. On the contrary, the context in which the Commission's request was made...