People of State of Cal. v. C. A. B.

Decision Date20 June 1978
Citation581 F.2d 954
CourtU.S. Court of Appeals — District of Columbia Circuit

Rufus G. Thayer, Jr., Tiburon, Cal., with whom J. Calvin Simpson, San Francisco, Cal., was on the brief, for petitioner in No. 76-2117. Also Richard D. Gravelle, San Francisco, Cal., entered an appearance for petitioner in No. 76-2117.

William R. Nusbaum, Washington, D. C., with whom Paul Rodgers, Washington, D. C., was on the brief, for petitioner in No. 76-2123.

John L. Hill, Atty. Gen. and John David Hughes, Asst. Atty. Gen., Austin, Tex., were on the brief, for petitioner in No. 76-2155.

Alan R. Demby, Atty., C. A. B., Washington, D. C., with whom James C. Schultz, Gen. Counsel and Jerome Nelson, Deputy Gen. Counsel, C. A. B., Glen M. Bendixsen, Associate Gen. Counsel and Robert L. Toomey, Atty., C. A. B., Washington, D. C., were on the brief for respondents.

Reuben B. Robertson, III, Washington, D. C., with whom Alan B. Morrison, Washington, D. C., was on the brief, for intervenor, Ralph Nader and the Aviation Consumer Action Project.

Michael A. Katz, Arnold T. Aikens and Peter D. Connally were on the brief, for intervenor United Air Lines.

Richard A. Fitzgerald, David L. Vaughan and John W. Simpson, Washington, D. C., were on the brief, for intervenor, Hughes Airwest.

Ralph B. Jordan and Dennis A. Barlow, Bakersfield, Cal., and Robert E. Moock, Visalia, Cal., were on the brief, for amicus curiae, City of Kern and City of Visalia.

Emory N. Ellis, Jr., Washington, D. C., entered an appearance for intervenors, Western Airlines and Texas International Airlines, Inc.

Edmund E. Harvey, Washington, D. C., entered an appearance for intervenor, Trans World Airlines, Inc., in No. 76-2123 only.

Robert B. Nicholson and James F. Ponsoldt, Atty., Dept. of Justice, Washington, D. C., entered appearances in Nos. 76-2123 and 76-2155.

Before WRIGHT, Chief Judge, and BAZELON and WILKEY, Circuit Judges.

Opinion for the Court filed by WILKEY, Circuit Judge.

WILKEY, Circuit Judge.

Presented for our review is an order of the Civil Aeronautics Board (Board) in which lawful fares were set for the transportation, by air carriers operating under Board certification, of interstate and intrastate passengers in the intra-California and intra-Texas markets. Dual economic regulation by federal and state agencies has produced a conflict. In a broader sense, our review concerns the authority granted the Board by statute and delegated to it by the Congress under the Commerce Clause, Article I, Section 8, Clause 3, of the United States Constitution.

I. BACKGROUND

The Public Utilities Commission of the State of California (CPUC) and the Texas Aeronautics Commission (TAC) are state regulatory agencies which license intrastate air carriers. In California intrastate fares are set by PUC regulation, but in Texas competitive forces operate to establish the fare structure without state regulation at the present time. In both of these states fares have been in effect for intrastate air transportation which are lower than those set by the Board for interstate transportation.

Under the authority granted it by the Federal Aviation Act 1 the Board authorizes air carriers and regulates the fares they charge for air transportation in interstate carriage, as defined in §§ 1301(10) and (21) (a) of the Federal Aviation Act. 2 Interstate transportation includes carriage between two or more points within a state when it is part of a longer journey commencing from or destined to another state. It is obvious that air carriers transporting intrastate traffic between points in a single state also carry interstate traffic.

The term "interstate carrier," as used in this opinion, refers to a carrier holding a certificate of public convenience and necessity issued by the Board authorizing it to engage in interstate air transportation.

Recognizing that fare differences existed between interstate and intrastate passage in the California and Texas markets, the Board instituted a formal investigation 3 on 25 September 1972 to determine whether unjust discrimination resulted from the fares charged by interstate carriers in violation of the Federal Aviation Act providing No air carrier or foreign air carrier shall make, give, or cause any undue or unreasonable preference or advantage to any particular person, port, locality, or description of traffic in air transportation in any respect whatsoever or subject any particular person, port, locality, or description of traffic in air transportation to any unjust discrimination or any undue or unreasonable prejudice or disadvantage in any respect whatsoever. 4

The Initial Decision of the ALJ found that there were discriminatory differences between the interstate and intrastate fares but viewed the discrimination as justified because of the need of the interstate carriers to compete with intrastate carriers in the local markets. The need to compete was caused by the revenue losses the interstate carriers would suffer otherwise. The conclusion reached in the Initial Decision was that the discrimination was not unjust.

The Board reversed the Initial Decision in determining that there were no significant differences in costs incurred and services rendered, that passengers were intermingled, and that knowledgeable interstate passengers, through "double ticketing," were paying the lower intrastate fares for travel which was actually interstate. In the opinion of the Board these factors amounted to unjust discrimination, because all passengers were not treated equally.

The Board concluded that only by eliminating the fare differentials could a remedy be achieved. It reasoned that while two levels of fares remained in effect, no proper safeguard could be found, as the intent of the passenger had to be revealed to the carrier to determine which level was authorized. The availability of lower fares would obviously create a reason for interstate passengers not to reveal their travel plans. Accordingly, the Board ordered interstate carriers to charge fares at rate levels which have been established for operations throughout their domestic systems generally, such fares to be "constructed in accordance with the Board's prior decisions in the Domestic Passenger-Fare Investigation, Dockets 21866, et al., 5 except that such fares may be lowered to the extent necessary to meet the competition from intrastate carriers." 6

In taking this action the Board relied upon the Supreme Court's Shreveport decision 7 interpreting the then-existing Section 3 of the Interstate Commerce Act as conferring power on the Interstate Commerce Commission to regulate intrastate rates in order to eliminate unjust discrimination against interstate movements, 49 U.S.C. § 1374(b) of the Federal Aviation Act having been patterned after Section 3 of the Interstate Commerce Act.

The question before this court is whether the Board's order was in excess of its statutory authority, unsupported by substantial evidence, or arbitrary and capricious. 8

II. ANALYSIS OF ISSUES
A. Unjust Discrimination

We must initially determine whether there was substantial evidence for a finding of unjust discrimination because of a dual fare level between interstate and intrastate passengers traveling on interstate carriers. 9

It is clear from the record that all passengers received the same services, which were provided at the same costs, and that interstate and intrastate passengers were intermingled. It is also clear that some interstate passengers, who have been termed "knowledgeable" because they were aware of the dual fare structure, had made a practice of purchasing separately the intrastate

portion of their passage. The effect is that intrastate passengers and knowledgeable interstate passengers were traveling within California and Texas at lower fares than all other interstate passengers. On the basis of the record, there was substantial evidence upon which the Board could find unjust discrimination, and we uphold that finding.

B. Authority to Eliminate Unjust Discrimination

We move next to the question of whether the Board exceeded its authority in establishing a single fare level applicable to both interstate and intrastate passengers traveling on interstate carriers.

Petitioners attack the Board decision by claiming that the Board has usurped the power of a state to control air commerce strictly within its borders and ousted the state agencies from economic regulation of intrastate fares. The argument runs that, in the absence of a specific grant of authority to the Board, a state is free to regulate commerce within its confines. The Board order has the effect of regulating intrastate fares, a right reserved to the state and one which the Federal Aviation Act does not grant to the Board. On certain noncompetitive, or monopoly, routes in California served only by Inter...

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6 cases
  • People ex rel. Harris v. Delta Air Lines, Inc.
    • United States
    • California Court of Appeals Court of Appeals
    • May 25, 2016
    ...were able to regulate intrastate airfares (including those offered by interstate air carriers) [ (see, e.g., California v. CAB (1978) 189 U.S.App.D.C. 176, 178, 581 F.2d 954, 956, cert. denied (1979) 439 U.S. 1068, 99 S.Ct. 834, 59 L.Ed.2d 32 ) ], and to enforce their own laws against decep......
  • Morales v. Trans World Airlines, Inc
    • United States
    • U.S. Supreme Court
    • June 1, 1992
    ...were able to regulate intrastate air fares (including those offered by interstate air carriers), see, e.g., California v. CAB, 189 U.S.App.D.C. 176, 178, 581 F.2d 954, 956 (1978), cert. denied, 439 U.S. 1068, 99 S.Ct. 834, 59 L.Ed.2d 32 (1979), and to enforce their own laws against deceptiv......
  • Charas v. Trans World Airlines, Inc.
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • November 30, 1998
    ...As a result, states were not prevented from enforcing their own laws, despite the economic effect on the airlines. See California v. CAB, 581 F.2d 954, 956 (D.C.Cir.1978) (holding that states were permitted to regulate intrastate airfares); Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 3......
  • Ginsberg v. Nw. Inc.
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • August 5, 2011
    ...preempt state law, this clause allowed states to regulate airlines, leading to economic distortions. See, e.g., California v. CAB, 581 F.2d 954, 956 (D.C.Cir.1978) (concluding that states may regulate intrastate airfares, even if such regulations interfere with interstate prices). By 1978 C......
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