Las Vegas Hacienda, Inc. v. CAB

• Decision Date: 23 February 1962
• Docket Number: No. 17081.,17081.
• Parties: LAS VEGAS HACIENDA, INC. and Henry F. Price, Petitioners, v. CIVIL AERONAUTICS BOARD, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

298 F.2d 430 (1962)

LAS VEGAS HACIENDA, INC. and Henry F. Price, Petitioners, v. CIVIL AERONAUTICS BOARD, Respondent.

No. 17081.

United States Court of Appeals Ninth Circuit.

January 16, 1962.

Rehearing Denied February 23, 1962.

COPYRIGHT MATERIAL OMITTED

Flint & Mackay, John W. Preston, Jr., Robert E. Willard, Los Angeles, Cal., for petitioner.

Lee Loevinger, Asst. Atty. Gen., Richard A. Solomon, Attorney, Dept. of Justice, John H. Wanner, General Counsel, C. A. B., Joseph B. Goldman, Deputy General Counsel, O. D. Ozment, Asso. General Counsel, Litigation and Research, Robert L. Toomey, Attorney, C. A. B., Washington, D. C., for respondent.

Before MERRILL and BROWNING, Circuit Judges, and JAMES M. CARTER, District Judge.

BROWNING, Circuit Judge.

Las Vegas Hacienda, Inc. operates a resort hotel at Las Vegas, Nevada. Over a period of years it has advertised and sold in the Los Angeles area a "package tour" which includes a "free" airplane ride to and from Las Vegas. The transportation is provided in planes owned by Hacienda and operated by its employees through its "Flight Division," managed by Henry F. Price. The Civil Aeronautics Board has held that Hacienda and Price are engaged in "the carriage by aircraft of persons or property as a common carrier for compensation or hire" in interstate commerce without the certificate of public convenience and necessity required by the Federal Aviation Act, and has ordered them to cease and desist.

Petitioners challenge both the Board's power to issue the order, and the form in which the order is cast. As to the Board's power, they argue that they are not subject to economic regulation under the Act because the transportation they provide is merely incidental to their resort hotel business. As to form, they argue that the Board's order is so vague and general that it fails to give fair notice of the conduct which it prohibits. We conclude that the Board's classification of Hacienda as a "common carrier for compensation or hire" required to be certificated is supported by substantial evidence and soundly based in law, and that the Board's cease and desist order provides fair notice of what it prohibits when read in the light of the Board's opinion. We further conclude that the record does not contain substantial evidence to support the Board's order with respect to Price. This portion of the Board's order is stricken, and the Board's order is otherwise affirmed.

I

The Federal Aviation Act¹ provides for broad economic regulation² of "air transportation."³ The Civil Aeronautics Board is under an affirmative statutory duty to exercise its regulatory powers over "air transportation" so as to foster sound economic conditions, promote economical and efficient service at reasonable charges, and avoid destructive competitive practices.⁴ The legislative history of the Act emphasizes the importance attached by the Congress to the achievement of these purposes.⁵ Obviously the economic regulation contemplated by the statute can be effective only if the commercial activity to which it is made applicable — "air transportation" — represents a reasonably discrete market in practical business terms. The proper interpretation of this statutory term is therefore of crucial importance in the administration of the Act.

So far as here pertinent, the term "air transportation" is ultimately defined by the Act as "carriage by aircraft of persons or property as a common carrier for compensation or hire * * *."⁶ The term "common carrier," which is central in this statutory definition of "air transportation," is an ancient one in our law and has been applied in many legal and factual contexts. It is not surprising that the numerous decisions defining the term are somewhat less than harmonious. The fact is that these precedents leave a considerable area of choice which the Board necessarily exercises in applying the broad definition of the statute to particular carriers to determine whether they are subject to regulation.

Whether the Board has chosen correctly in any given instance is, of course, subject to review by this court, for "an agency may not finally decide the limits of its statutory power. That is a judicial function." Social Security Board v. Nierotko, 327 U.S. 358, 369, 66 S.Ct. 637, 643, 90 L.Ed. 718 (1946). It is equally clear, however, that the Board's decisions in these cases involve the application of technical knowledge which the Board, and not the court, is presumed to have. We understand that in these circumstances we are to affirm the Board's action if it has "`warrant in the record' and a reasonable basis in law." N. L. R. B. v. Hearst Publications, 322 U.S. 111, 131, 64 S.Ct. 851, 88 L.Ed. 1170 (1944). And see N. L. R. B. v. CocaCola Bottling Co., 350 U.S. 264, 269, 76 S.Ct. 383, 100 L.Ed. 285 (1956); Swift & Co. v. United States, 316 U.S. 216, 224-225, 62 S.Ct. 948, 86 L.Ed. 1391 (1942); Shields v. Utah Idaho Central R. Co., 305 U.S. 177, 184-185, 59 S.Ct. 160, 83 L.Ed. 111 (1938).

The Board centered its inquiry in the present case upon whether the alleged common carrier was engaged as a regular business in offering air transportation to the general public in the commercial market. The Board has taken the same approach in other cases.⁷ This general emphasis is justified by the common law precedents, for the dominant factor in fixing common carrier status at common law is the presence of a "holding out" to transport the property or person of any member of the public who might choose to employ the proffered service. State of Washington ex rel. Stimson Lumber Co. v. Kuykendall, 275 U.S. 207, 211-212, 48 S.Ct. 41, 72 L.Ed. 241 (1927). The test which the Board applies is an objective one, relying upon what the carrier actually does rather than upon the label which the carrier attaches to its activity or the purpose which motivates it.⁸ So long as the air carrier is competing commercially in the market for the patronage of the general public, the Board holds that it is immaterial that the service offered will be attractive only to a limited group;⁹ or that it may be performed pursuant to special contract.¹⁰ And it is also immaterial that in terms of the carrier's own bookkeeping the transportation may be furnished at cost,¹¹ at a loss,¹² or even without charge.¹³ The Board thus interprets the Act in a way which makes effective economic regulation under the statute possible by bringing within the regulatory scheme all those who compete in the commercial market in the business of offering air transportation to the public generally.

In the present case the record shows that over a period of years the petitioners have conducted regularly scheduled passenger flights from the Los Angeles area to Las Vegas. The flights were conducted in planes owned by Hacienda, marked with its name, and operated by uniformed Hacienda employees. They departed from regular commercial airports. Passengers received the usual air terminal services: a check-in counter, boarding passes, flight calls, and the assistance of ground attendants. The flights were sometimes identified in Hacienda's advertising as "Fiesta Flights." The package tours of which the flights were a part were advertised and sold as "Champagne Tours." Patrons were solicited from the general public in the Los Angeles area through advertisements in radio, newspapers, and brochures. These used such leaders as "Fly Free to Vegas," described the aircraft used, and set out the flight schedules. "Champagne Tours" were sold both through Hacienda's own ticket offices and through travel and tour agents who also sold tickets on other regularly scheduled passenger airlines. The price of the "Champagne Tour" was $27.50. Round trip air transportation between Las Vegas and the Los Angeles area by certified carrier was $39.20 first class, $30.50 coach. As the Examiner found, not surprisingly, "the evidence here is substantial that some people purchase the tour merely to obtain transportation."¹⁴

Clearly the record contained substantial support for the Board's conclusion that Hacienda was a "common carrier for compensation or hire," as the Board correctly defined that statutory phrase.

II

Hacienda concedes that the record justifies the conclusion that it represented to the traveling public that transportation by air from the Los Angeles area to Las Vegas is available on a regularly scheduled basis by the purchase of Hacienda's "Champagne Tour." Nonetheless, Hacienda insists that it is not subject to economic regulation under the Act for a variety of reasons, all of which rest essentially upon the facts that Hacienda was primarily engaged in the resort hotel business and not the transportation business, that the furnishing of the transportation was only incidental to the promotion and operation of its resort hotel, and that it was not interested in profiting and did not profit directly from the transportation.

Petitioners advertised the transportation portion of their package tour as "free," and furnished it only as a part of a "Champagne Tour" consisting of other goods and services, the separate prices of which added up to the total price for the Tour.¹⁵ Hacienda's books attributed no income to the sale of the transportation as such and carried the expense of it's transportation activities as part of the general operating expense of the hotel. No transportation tax was paid to the Bureau of Internal Revenue.

Hacienda argued to the Board that the transportation which it provided was entirely free and hence was not "for compensation or hire" as required to bring it within the economic coverage of the Act. However, Hacienda has disclaimed that contention in this court in apparent recognition of the obvious fact that payment for the "Tour" was payment for all that the customer received in return, including the air transportation. Indeed, in the present case the air transportation was intended to be, and undoubtedly was, the principal...