Hughes Air Corp. v. Public Utilities Commission of State of Cal., s. 79-4272

Decision Date11 May 1981
Docket Number79-4510 and 79-4751,Nos. 79-4272,s. 79-4272
Citation644 F.2d 1334
PartiesHUGHES AIR CORP., dba Hughes Airwest, the Flying Tiger Line, Inc., Delta Air Lines, Inc., American Airlines, Inc., Air California, Western Air Lines, Inc., United Airlines, Inc., Trans World Airlines, Inc., Continental Air Lines, Inc., Pacific Southwest Airlines, and Pan American World Airways, Plaintiffs-Appellees, and United States of America and Civil Aeronautics Board, Intervenors-Appellees, v. The PUBLIC UTILITIES COMMISSION OF the STATE OF CALIFORNIA, Robert Batinovich, Vernon L. Sturgeon, William Symons, Jr., Richard D. Gravelle, and Claire T. Dedrick, the members of and constituting said Public Utilities Commission, Defendants-Appellants. SIERRA FLITE SERVICE, INC., Plaintiff-Appellee, and United States of America and Civil Aeronautics Board, Intervenors-Appellees, v. The PUBLIC UTILITIES COMMISSION OF the STATE OF CALIFORNIA et al., Defendants-Appellants, Oregon Public Utility Commission, Intervenor-Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

Randolph W. Deutsch, San Francisco, Cal., Mark H. Gallant, Washington, D. C., for Public Utilities Comm.; Janice E. Kerr, San Francisco, Cal., on brief.

Gordon E. Davis, Brobeck, Pheleger & Harrison, San Francisco, Cal., Joseph B. Scott, Washington, D. C., for Hughes Air Corp.

Appeals from the United States District Court for the Northern District of California.

Before SKOPIL and BOOCHEVER, Circuit Judges, and TAYLOR, District Judge. *

SKOPIL, Circuit Judge:

These cases arise under the Airline Deregulation Act of 1978, 49 U.S.C. §§ 1371-76, which preempts states from regulating certain interstate air carriers. The issues on appeal concern the applicability and constitutionality of the preemption provision. We must decide: (1) whether a carrier exempted from certification is within the scope of the preemption clause (Sierra Flite only), and (2) whether such federal preemption of state regulation is within the power of Congress under the commerce clause.

I. THE FEDERAL REGULATORY FRAMEWORK

The Federal Aviation Act of 1958, 49 U.S.C. §§ 1301 et seq., and other statutes 1 set up a comprehensive federal system regulating interstate air transportation. These statutes established the Civil Aeronautics Board ("the CAB" or "the Board"). The cornerstone of the federal regulatory system was Section 401 of the Federal Aviation Act of 1958, 49 U.S.C. § 1371, which prohibited entry into the field of interstate air transportation without a certificate of public convenience and necessity from the CAB. The Board's mandate applied only to "interstate, overseas or foreign air transportation."

Section 416(b)(1), 49 U.S.C. § 1386(b)(1), enabled the CAB to "exempt from the requirements of (Title IV) 2 or any provision thereof ... any air carrier or class of air carriers ..." Under the power of section 416(b)(1), the CAB had exempted a class of carriers known as "commuter air carriers" from the requirement of certification and many other aspects of economic regulation. 14 CFR Part 298. A "commuter air carrier" is a carrier that does not use large aircraft, does not hold certificate authority issued by the CAB, provides limited scheduled interstate service, has registered with the CAB, has and maintains liability insurance, and waives the liability limitation of the Warsaw Convention. Id.

Hughes Air Corporation and associated plaintiffs in No. 79-4272 (Hughes) are all air carriers certificated by the CAB pursuant to section 401(a). Sierra Flite is a commuter air carrier, and is exempted from most of the CAB's economic regulation, including the requirement to obtain a certificate, pursuant to section 416(b)(1).

Contemporaneous with this federal regulatory effort, several states, including California and Oregon, began regulating fares of intrastate airlines, as well as the solely intrastate activities of CAB-certificated or exempt airlines. The authority to regulate intrastate fares of interstate airlines was upheld by the California Supreme Court in 1954; the airlines' appeal from this decision was dismissed by the Supreme Court for want of a substantial federal question. People v. Western Air Lines, Inc., 42 Cal.2d 621, 268 P.2d 723, appeal dismissed sub nom. Western Airlines, Inc. v. California, 348 U.S. 859, 75 S.Ct. 87, 99 L.Ed. 677 (1954). In California and Oregon such regulation is performed by the California Public Utilities Commission and the Oregon Public Utilities Commission ("the PUCs").

In 1978 Congress passed the Airline Deregulation Act of 1978, 49 U.S.C. §§ 1371-76 ("the Deregulation Act"). This Act marks a fundamental change in the "direction and policy of aviation regulation." It constitutes "comprehensive legislation" designed to provide a "gradual and phased transition to a deregulated system". H.R.Rep.No.1779, 95th Cong., 2d Sess. 56 (1978).

The Deregulation Act substantially revises the economic regulatory provisions of the 1958 Act. The statute limited the board's power to find fares unjustly or unreasonably high or low and, as of January 1, 1983, relieved carriers of all statutory obligations relating to tariffs and fares. The Board's correlative powers were terminated. Deregulation Act § 40(a), adding §§ 1601(a)(2)(A), (B), and (D) to the Federal Aviation Act.

Comparable changes were made in the areas of routes and services. The Deregulation Act liberalized the standard for granting exemption authority by deleting the requirement that the CAB find certification to be an "undue burden" and requiring only a determination that an exemption be "consistent with the public interest," Deregulation Act § 31(a), 92 Stat. 1731, and by expressly codifying the air taxi exemption, Deregulation Act § 32, 92 Stat. 1732.

Section 4 of the Deregulation Act contains a federal preemption provision barring state regulation of rates, routes, or services of certain CAB-authorized airlines, by adding the following section to the Federal Aviation Act:

Sec. 105(a)(1). Except as provided in paragraph (2) of this subsection, no State or political subdivision thereof and no interstate agency or other political agency of two or more States shall enact or enforce any law, rule, regulation, standard or other provision having the force and effect of law relating to rates, routes, or services of any air carrier having authority under Title IV of this Act to provide interstate air transportation.

(2) Except with respect to air transportation (other than charter air transportation) provided pursuant to a certificate issued by the Board under Section 401 of this Act, the provisions of paragraph (1) of this subsection shall not apply to any transportation by air of persons, property, or mail conducted wholly within the State of Alaska.

It is the interpretation and constitutionality of this section that is the basis of the present litigation.

II. PROCEEDINGS BELOW

After the enactment of the Deregulation Act, Hughes and Sierra Flite individually advised the California Public Utilities Commission ("the PUC") that they would thereafter provide all air transportation services within California in accordance with their tariffs on file with the CAB, and therefore cancel their intrastate tariffs on file with the PUC. The PUC refused to accept the cancellations.

Hughes sought declaratory and injunctive relief against the PUC in the district court. Sierra Flite requested similar relief separately in the same court. The United States and the CAB intervened as plaintiff-intervenor in both cases. The Oregon PUC intervened as defendant-intervenor in the Sierra Flite case.

The district court entered separate orders declaring that the Federal Aviation Act as amended by Section 4 of the Airlines Deregulation Act preempted all laws, regulations and authority of California purporting to authorize the PUC to regulate the rates, routes and services of CAB-certificated interstate air carriers and of exempt commuter air carriers. It permanently enjoined the PUC from enforcing all such laws, regulations, orders and authority. The PUCs appeal.

III. DID CONGRESS INTEND TO PREEMPT REGULATION OF EXEMPTED CARRIERS?

The first issue, which relates to Sierra Flite only, is whether Congress intended to include carriers exempted from CAB certification pursuant to section 416(b)(1) within the preemption provision.

The preemption provision preempts states from regulating the intrastate activities of any carrier "having authority under Title IV." The PUCs argue that "having authority under Title IV" applies only to carriers who have been granted authority to operate by CAB-certification, and that carriers exempted from certification and major economic regulation do not "hav(e) authority under Title IV." We disagree with this argument and hold that Congress intended to include carriers exempted from CAB certification pursuant to section 416(b)(1) within the scope of the preemption provision.

In interpreting a statute, our objective is to ascertain the intent of Congress. Philbrook v. Glodgett, 421 U.S. 707, 95 S.Ct. 1893, 44 L.Ed.2d 525 (1975). The primary rule of statutory construction is to ascertain and give effect to the plain meaning of the language used. Section 416, under which the CAB is empowered to grant exemptions from the certification required by section 401, is a part of Title IV of the Act. Thus the section 416 exemption, like a Section 401 certification, comes within the terms of the preemption provision of section 105 as "authority under Title IV of this Act to provide interstate transportation".

The PUCs contend that the plain meaning of the word "authorize" does not include the concept of "exemption". We cannot agree. Carriers exempted from certification still operate with authority granted by the CAB. Without an exemption they would be unable to operate in interstate commerce. They are also subject to economic regulation (the focus of Title IV), though less...

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