National Small Shipments Traffic Conference, Inc. v. Civil Aeronautics Bd.

• Decision Date: 11 February 1980
• Docket Number: No. 78-2163,78-2163
• Citation: 199 U.S.App.D.C. 335,618 F.2d 819
• Parties: NATIONAL SMALL SHIPMENTS TRAFFIC CONFERENCE, INC. and Drug and Toilet Preparation Traffic Conference, Inc., Petitioners, * v. CIVIL AERONAUTICS BOARD, Respondent, * Animal Shipper Parties, Flying Tiger Line Inc., Trans World Airlines et al., Our Animal Wards, and Shippers National Freight Claim Council, Inc., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 819

618 F.2d 819

199 U.S.App.D.C. 335

NATIONAL SMALL SHIPMENTS TRAFFIC CONFERENCE, INC. and Drug and Toilet Preparation Traffic Conference, Inc., Petitioners, ^* v. CIVIL AERONAUTICS BOARD, Respondent, ^*

Animal Shipper Parties, Flying Tiger Line Inc., Trans World

Airlines et al., Our Animal Wards, and Shippers

National Freight Claim Council, Inc., Intervenors.

No. 78-2163.

United States Court of Appeals, District of Columbia Circuit.

Argued Dec. 4, 1979.

Decided Feb. 11, 1980.

Petitions for Review of an Order of the Civil Aeronautics board.

Renee D. Rysdahl, Washington, D. C., with whom John F. Donelan, Frederick L. Wood, Daniel J. Sweeney, and Steven J. Kalish, Washington, D. C., were on brief, for petitioners National Small Shipments Traffic Conference, Inc. et al. in Nos. 78-2163 and 78-2164.

Gerry Levenberg, Washington, D. C., for petitioners (intervenors in Nos. 78-2163 and 78-2164) Trans World Airlines et al. in No. 78-2187.

Lawrence W. Bierlein, Washington, D. C., was on brief for petitioner Council for Safe Transportation of Hazardous Articles in No. 78-2038.

David R. Murchison, Washington, D. C., with whom James E. Landry, Washington, D. C., was on brief, for petitioner Air Transport Association of America in No. 78-2308.

Thomas L. Ray, Atty., Civil Aeronautics Board, Washington, D. C., with whom Gary J. Edles, Deputy Gen. Counsel, Glen M. Bendixsen, Associate Gen. Counsel, and Robert L. Toomey, Atty., Civil Aeronautics Board, and John J. Powers, III and Daniel J. Conway, Attys., Dept. of Justice, Washington, D. C., were on brief, for respondent. Barry Grossman and William D. Coston, Attys., Dept. of Justice, Washington, D. C., also entered appearances for respondent.

N. Marshall Meyers, Washington, D. C., was on brief for intervenor Animal Shipper Parties. Richard N. Bagenstos, Washington, D. C., also entered an appearance for intervenor Animal Shipper Parties.

J. W. Rosenthal, Washington, D. C., was on brief for intervenor Flying Tiger Line Inc. Joel Stephen Burton, Washington, D. C., also entered an appearance for intervenor Flying Tiger Line Inc.

Rotraud M. Perry, Washington, D. C., was on brief for intervenor Our Animal Wards.

William J. Augello, Huntington, N. Y., was on brief for intervenor Shippers National Freight Claim Council, Inc. Charles Ephraim and James F. Flint, Washington, D. C., also entered appearances for intervenor Shippers National Freight Claim Council, Inc.

Before WRIGHT, Chief Judge, BAZELON, Senior Circuit Judge, and ROBB, Circuit Judge.

Opinion for the court filed by Chief Judge J. SKELLY WRIGHT.

J. SKELLY WRIGHT, Chief Judge:

These consolidated cases are petitions for review of three provisions of the Civil Aeronautics Board's (CAB or Board) comprehensive general regulations governing domestic air cargo transportation. ER-1080, 14 C.F.R. § 291 (1979). The challenged rules exempt domestic air cargo carriers from (1) the duty to file tariffs with the CAB showing the carrier's rates, rules, and practices for cargo transportation, imposed by Section 403(a) of the Federal Aviation Act (the Act), 49 U.S.C. § 1373(a) (1976); (2) the duty to provide air transportation service upon reasonable request the statutory duty to carry imposed by Section 404(a)(1) of the Act, 49 U.S.C. § 1374(a)(1) (1976); and (3) the statutory provisions relating to the filing of inter-carrier agreements affecting domestic air transportation, Pub.L.No.95-504 §§ 28(a) and 30(a). The petitioners ¹ contend that the CAB exceeded its authority under the statute in promulgating the challenged regulations, and that the decision to adopt the regulations was arbitrary and capricious.

I

These cases arise against a background of fundamental changes in Congress' approach to the air transportation industry. For over forty years, under the Federal Aviation Act, 49 U.S.C. § 1301 et seq. (1976) (and its predecessor, the Civil Aeronautics Act of 1938, 52 Stat. 977), the industry was subjected to a system of detailed economic regulation which this court has characterized as "severely anticompetitive." United States v. CAB, 511 F.2d 1315, 1322 (D.C.Cir.1975). Under Section 401(a) of the Act, 49 U.S.C. § 1371(a), no person could engage in air transportation without first obtaining a certificate of public convenience and necessity from the CAB. Once certified, a carrier was obliged "to provide and furnish * * * air transportation, as authorized by its certificate, upon reasonable request therefor * * *." Section 404(a), 49 U.S.C. § 1374(a). Carriers were required to set forth their rates, rules, and practices in tariffs filed with the CAB and to comply strictly with these tariffs. Section 403, 49 U.S.C. § 1373. The Board was authorized to proscribe any existing or proposed rates, rules, and practices that were or would be unjust or unreasonable. Section 1002(d), 49 U.S.C. § 1482(d). Proposed changes in carrier rates had to be filed with the Board at least 30 days before the intended effective date. Section 403(c), 49 U.S.C. § 1373(c). The Board could suspend these proposed rates for up to six months while it considered whether they were unjust or unreasonable. Section 1002(g), 49 U.S.C. § 1482(g). Various kinds of corporate transactions involving airlines were also subject to Board regulation. For example, no one could acquire control of an air carrier without prior Board approval. Section 408(a)(5), 49 U.S.C. § 1378(a)(5). And any agreement between two or more airlines concerning cooperative working arrangements had to be submitted to the Board for approval. Section 412, 49 U.S.C. § 1382. Transactions approved by the Board under Sections 408 and 412 were automatically exempt from the antitrust laws. Section 414, 49 U.S.C. § 1384. The economic regulatory provisions of the Act were not in fact applied to all air carriers. Acting under authority granted it by Section 416 of the Act, 49 U.S.C. § 1386, ² the Board established a classification of air carriers designated "air taxi operators" which were exempt from most of these provisions of the Act. ³ 14 C.F.R. § 298 (1979). Air taxi operators were restricted as to the size of the planes they could operate.

Major changes in the approach to the domestic air cargo transportation industry were signaled by the enactment of the cargo deregulation legislative amendments to the Federal Aviation Act, Pub.L.No.95-163, 91 Stat. 1278. ⁴ The amendments completely overhauled the provisions of the Act pertaining to air cargo transportation. Congress stated that "encouragement and development of an integrated transportation system relying upon competitive market forces to determine the extent, variety, quality, and price of such services" is in the public interest. Section 102(b)(2), 49 U.S.C. § 1302(b)(2) (Supp. I 1977). A new certification procedure was established, under which virtually any United States citizen could obtain authorization to provide domestic all-cargo transportation, without restrictions as to places served or rates charged. Section 418, 49 U.S.C. § 1388 (Supp. I 1977). Moreover, the cargo deregulation legislation terminated the Board's authority to find interstate air cargo rates, rules, and practices unjust and unreasonable and to prescribe new rates, rules, and practices in their stead. However, the Board may still find rates unlawful after investigation, on grounds that they are unjustly discriminatory, unduly preferential or prejudicial, or predatory, and the Board has the authority to suspend any such rates while it investigates them. Section 1002(d)(3) and (g), 49 U.S.C. § 1482(d)(3) & (g) (Supp. I 1977). Finally, the amendments empowered the Board to exempt carriers operating under the new Section 418 certificates from "section 1371(a) of this title, and any other section of this chapter which the Board by rule determines appropriate * * *." Section 418(c), 49 U.S.C. § 1388(c) (Supp. I 1977).

II

A. The Proposed Regulations

In order to determine the ground rules that would govern the provision of domestic air cargo transportation under the new regime, the Board initiated the rulemaking proceedings leading to the regulations challenged by these petitioners. The Board's notice of proposed rulemaking set forth proposed rules on a variety of issues. Many of these proposals were substantially adopted in the final regulations and are not challenged by the petitioners in these cases.

Pertinent for our purposes was the Board's proposal to exempt air cargo carriers from the tariff and agreement filing requirements and the duty to carry provisions of the Act. The Board pointed out:

The Congress clearly intended Pub.L. 95-163 to substantially deregulate the domestic air cargo industry. By positive statutory language, Congress completely revoked the core elements of the Board's regulatory powers over domestic air freight: its ability to control entry and exit, and its ability to set or control rates by analyzing the relationship between those rates and carrier costs. To complete the task of deregulating air freight, however, Congress delegated to the Board considerable discretion. * * *

Joint Appendix (JA) 1. ⁵

The Board noted that the literal language of its exemption authority under the Act covered the proposed rules. It acknowledged that the Conference Report on the cargo deregulation legislation had stated:

(T)he Managers do not contemplate that the Board will exempt carriers from the requirement of filing tariffs. Tariffs provide valuable notice of rates to users of air transportation. Tariffs will be necessary for the Board to effectively carry out its duties to determine whether rates for the transportation of property are discriminatory, preferential, prejudicial, or predatory.

H.R.Rep.No.95-773, 95th Cong., 1st Sess. 14-15 (1977) (Conference Report). The Board reasoned, however, that "tariff filing is inconsistent with the overall scheme of the legislation which was intended to deregulate entry and pricing of air freight." JA 5....