Commonwealth of Virginia v. CAB, 73-2070

• Decision Date: 06 June 1974
• Docket Number: No. 73-2070,73-2076.,73-2070
• Citation: 498 F.2d 129
• Parties: The COMMONWEALTH OF VIRGINIA, Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent. DEPARTMENT OF TRANSPORTATION OF the STATE OF MARYLAND (successor in interest to the Mayor and City Council of Baltimore, Maryland, originally named as a Complainant before the Civil Aeronautics Board), et al., Petitioners, v. CIVIL AERONAUTICS BOARD, Respondents.
• Court: U.S. Court of Appeals — Fourth Circuit

498 F.2d 129 (1974)

The COMMONWEALTH OF VIRGINIA, Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent.

DEPARTMENT OF TRANSPORTATION OF the STATE OF MARYLAND (successor in interest to the Mayor and City Council of Baltimore, Maryland, originally named as a Complainant before the Civil Aeronautics Board), et al., Petitioners, v. CIVIL AERONAUTICS BOARD, Respondents.

Nos. 73-2070, 73-2076.

United States Court of Appeals, Fourth Circuit.

Argued March 7, 1974.

Decided June 6, 1974.

COPYRIGHT MATERIAL OMITTED

Paul L. Reiber, Boston, Mass. (Andrew P. Miller, Atty. Gen., of Va., Vann H. Lefcoe and Henry M. Massie, Jr., Asst. Attys. Gen. of Virginia, on brief), for petitioner in No. 73-2070.

Frederick A. Ballard, Washington, D. C. (Francis B. Burch, Atty. Gen. of Maryland, J. Michael McWilliams and William M. Huddles, Asst. Attys. Gen. of Maryland, J. Cookman Boyd, Jr., John C. Smuck and Ballard & Beasley, Washington, D. C., on brief), for petitioners in No. 73-2076.

Alan R. Demby, Atty., Civil Aeronautics Board (O. D. Ozment, Deputy Gen. Counsel, Glen M. Bendixsen, Associate Gen. Counsel, Litigation and Research, Robert L. Toomey, Atty., Civil Aeronautics Board, Thomas E. Kauper, Asst. Atty. Gen., Carl D. Lawson, Atty., U. S. Dept. of Justice, Richard Littell, Gen. Counsel, Civil Aeronautics Board, on brief), for respondents in Nos. 73-2070 and 73-2076.

Nicholas Panarella, Jr., Asst. City Solicitor (Herbert Smolen, Asst. City Solicitor, John Mattioni, Deputy City Solicitor, Martin Weinbert, City Solicitor for the City of Philadelphia, on brief), for intervenor City of Philadelphia, in Nos. 73-2070 and 73-2076.

Herman F. Scheurer, Jr., Washington, D. C. (John J. McLaughlin, III and Shanley & Fisher, Washington, D. C., on brief), for intervenor Metropolitan Washington Board of Trade in Nos. 73-2070 and 73-2076.

Patrick W. Lee, Washington, D. C. (Jerry W. Ryan, James M. Burger, Reavis, Pogue, Neal & Rose, Washington, D. C., on brief), for joint intervenors Pan American World Airways, Inc. and Trans World Airlines, Inc. in Nos. 73-2070 and 73-2076.

Harold E. Spencer, Chicago, Ill. (Thomas F. McFarland, Jr., Michael M. Glusac, Detroit, Mich., Richard L. Curry, Robert L. Hankin, Chicago, Ill., John P. Cushman, James J. Tedesco, Jr., Detroit, Mich., Belnap, McCarthy, Spencer, Sweeney & Harkaway, Chicago, Ill., on brief), for intervenors Chicago and Detroit Interests in Nos. 73-2070 and 73-2076.

Laidler B. Mackall, Richard P. Taylor, John W. Arata and Steptoe & Johnson, Washington, D. C., on brief for intervenors Massachusetts Port Authority and Greater Boston Chamber of Commerce in Nos. 73-2070 and 73-2076.

Francis A. Mulhern, Deputy Gen. Counsel, Newark, N. J., on brief for intervenors The Port Authority of New York and New Jersey in Nos. 73-2070 and 73-2076).

Before WINTER, BUTZNER and FIELD, Circuit Judges.

WINTER, Circuit Judge:

Virginia's and Maryland's petitions to review an order of the Civil Aeronautics Board (Board), a proceeding in which two carriers—Pan American World Airways, Inc., and Trans World Airways, Inc.—and numerous affected localities —Philadelphia, Washington, Chicago, Detroit, Boston, Metropolitan New York-New Jersey—have been permitted to intervene, raises the basic question of whether the Board exceeded its statutory powers or acted arbitrarily or unreasonably in prescribing the formula for fixing new transatlantic cargo rates after it concluded that the then existing rate unduly preferred New York and prejudiced Boston, Philadelphia, Baltimore, Washington, Cleveland, Detroit and Chicago. Specifically, the Board found that cargo rates to United States gateway cities other than New York, constructed by adding the domestic rate from gateway city to New York to the New York-European rate, irrespective of whether the shipment was in fact flown through New York, was unduly preferential to New York and unduly prejudicial to the other gateway cities.¹ None of the parties contests the correctness or lawfulness of this conclusion.

Having concluded that the then existing rates were unlawful, the Board directed the establishment of rates computed by multiplying the mileage, by the shortest point-to-point route from European points to the various United States gateway points, by the New York-European rate per mile. It rejected the recommendation of the Administrative Law Judge that the best way to remedy the prejudicial rate structure was to prescribe a common rate, i. e., the same rate, for the gateways of Boston, New York, Philadelphia, Baltimore and Washington.² In these petitions for review, Baltimore and Washington, joined by Philadelphia,³ contend that the Board erred in failing to prescribe a common rate for the Northeast Corridor cities with New York.

From our review of the record, we conclude that the Board did not exceed its statutory authority or act arbitrarily or unreasonably in prescribing the mileage rate. We affirm the Board's order.

I.

While the Board has authority to prescribe rates, fares and practices in domestic air transportation, 49 U.S.C. § 1482(d), its authority over rates and fares for international air transportation is more limited. This is so because of Congressional recognition that the rate-making authority of one nation in international air transportation necessarily can be exercised only with the acquiescence of another nation to which traffic is destined or from which it originates.⁴ Thus, except for the recently granted limited power to suspend or reject unjust or unreasonable rates and fares in international transportation but not to prescribe just and reasonable new rates or fares,⁵ the rate-making authority of the Board in a case like the instant one is limited to a determination of whether a rate, fare or charge "is or will be unjustly discriminatory, or unduly preferential, or unduly prejudical," and if so, "to alter the same to the extent necessary to correct such discrimination, preference, or prejudice . . . ." 49 U.S.C. § 1482(f).

Both Virginia and Maryland advance two overall contentions why the Board's order should be set aside: first, that as a matter of law the Board was required to prescribe a common rate for all United States gateway cities, and, second, that the milage rate prescribed by the Board continues the previously existing undue preference to New York and undue discrimination against the other cities, especially Washington and Baltimore. These overall contentions involve a number of subsidiary arguments which we will treat seriatim. Additional facts will be stated where they are pertinent.

II.

The argument that, as a matter of law, the Board was required to prescribe a common rate is in part factual and in part legal. Both the Administrative Law Judge and the Board found that New York handles eighty percent of the nation's international air cargo; that, as a result of this volume, New York experiences the highest rate of pilferage from shipments of any other terminal in the United States; that congestion and delays result from the proliferation of traffic through New York; that non-transport expenses are greater at New York; and that shippers in places other than New York are encouraged by New York's then existing preferential rate to employ surface transportation (trucks) to and from New York rather than through air transportation to points of origin and destination in the gateway city nearest to the shipper. It is argued that since there is a strong national interest in avoiding a monopoly of imports and exports in a single port, the way to achieve equality of opportunity—indeed, the only way as prescribed by Congress —is to prescribe a common rate, notwithstanding that New York is 190 miles closer to European cities than Baltimore-Washington. Heavy reliance is placed upon the provisions of the Interstate Commerce Act, 24 Stat. 379, and I.C.C. and court decisions interpreting it to permit or require common-rating in certain instances, because it is asserted that such Act served as a model for the anti-discrimination provisions of the Federal Aviation Act of 1958, and therefore the latter should receive a like interpretation.

We think that there are several reasons to reject this argument. First, there can be little doubt that, in fashioning a remedy where undue preference and undue discrimination have been found to exist, an administrative agency possesses a large measure of discretion in choosing measures to remedy the discrimination. Its exercise of this discretion will not be disturbed absent a showing that its order lacks evidentiary support, transgresses some constitutional limit, or otherwise amounts to an abuse of power. Board of Trade v. United States, 314 U.S. 534, 546, 62 S.Ct. 366, 86 L.Ed. 432 (1942); Ayshire Collieries Corp. v. United States, 335 U. S. 573, 593, 69 S.Ct. 278, 93 L.Ed. 243 (1948).

Factually, the premise of the Board's order that "the most equitable and practical rate structure is one based on mileage" has substantial evidentiary support. The record shows that major costs for air transportation tend to vary with miles flown. It is, of course, true that the anti-discrimination provisions of the Federal Aviation Act are closely modeled on their counterparts in the Interstate Commerce Act, but that is not to say that the decisional precedents of one statute can be indiscriminately imputed to another. Substantial differences in the operations of rail and air transportation may well warrant a different regulatory approach to each industry. Chicago & Southern Air Lines, Inc. v. Waterman S.S Corp., 333 U.S. 103, 108, 68 S.Ct. 431, 92 L.Ed. 568 (1948); Las Vegas Hacienda, Inc. v. C.A.B., 298 F.2d 430 (9 Cir. 1962). Unit costs of railroad operations do not tend to increase with distance nearly as much as in air carrier operations. Thus, decisions approving or imposing common-rating on rail carriers would not depart from the cost of service approach of rate-making to the same extent as would common-rating...