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PAN AM v. BOYD

July 16, 1962

PAN AMERICAN WORLD AIRWAYS, INC., Plaintiff,
v.
Alan S. BOYD, Robert T. Murphy, Whitney Gilliland, Chan Gurney, G. Joseph Minetti, as individuals, and as members of the Civil Aeronautics Board, Defendants, and Alaska Airlines, Inc., Defendant-Intervenor



The opinion of the court was delivered by: HOLTZOFF

This action is brought by Pan American World Airways, Inc., an air carrier, against the members of the Civil Aeronautics Board, for a declaratory judgment adjudicating that the Board lacks authority to terminate a certificate of public convenience and necessity, which authorized the plaintiff to engage in air transportation between Seattle, Washington, and Fairbanks, Alaska. The plaintiff also seeks an injunction restraining the defendants from terminating this certificate and from proceeding with an investigation for the purpose. The matter is before the Court on cross-motions for summary judgment. *fn1"

There are four air carriers operating between Seattle, Washington and Alaska. One of them is the plaintiff, Pan American World Airways, Inc., which has been conducting air transportation between these places since August, 1938. A single certificate was issued to it by the Civil Aeronautics Board covering this route on July 31, 1946, the certificate being numbered, FAM-20. The route runs through Canada, with an intermediate stop at Whitehorse. The other three carriers on similar routes are Northwest Airlines, Inc., which started its operations in 1946; Alaska Airlines, Inc., which commenced its activities in 1951; and Pacific Northern Air Lines, Inc., which also entered the field in 1951.

 On March 19, 1962, the Civil Aeronautics Board issued an order instituting an investigation to determine whether public convenience and necessity required, and the Board should order, an alteration, amendment, modification, suspension, termination, or renewal, in whole or in part, or the four certificates just mentioned, 'in accordance with the tentative conclusions set forth in the attached study'. The ordering provisions of this document are preceded by detailed recitals and by what amount to findings of fact, conclusions of law, and an opinion. It is stated that the Board, as a result of an attached study, has reached 'tentative conclusions'. These conclusions are that the best route structure would be either a two-carrier or a three-carrier system, instead of the existing four-carrier system. It is set forth that the plaintiff's Alaska air service would be terminated, except at Fairbanks, which would be suspended until 60 days 'after the Board's decision in the 'Reopened Transpacific Route case'.' It is further stated that the Board tentatively concluded that the route modifications summarized in the three-carrier proposal were required. It is also pointed out that Pan American is no longer receiving a subsidy from the Government, while each of the other three carriers is in receipt of such a subvention. It is indicated that if the Pan American service were eliminated, the financial position of the other three carriers might be so strengthened as to obviate any necessity for further aid to them. In other words, the one air carrier on this route that is strong financially, would be excluded entirely in order to help its weaker competitors and thereby relieve the Government of the burden of partially supporting them. It seems strange to penalize the strongest air carrier in order to build up its rivals who seem to be in need of assistance. The Board made an ex parte decision in camera, and then set hearings, giving an opportunity to the affected parties to show cause why the decision should not be carried into effect.

 While the motives of the members of the Board are, of course, not in question and their good intentions are undoubted, nevertheless, this procedure seems unique and curious. One cannot conceive a judicial tribunal first tentatively deciding a case in camera ex parte, and then trying it, putting the burden of proof on the parties who disagree with the tentative decision. Such a course seems contrary to the basic traditions of the common law and the fundamental concepts of our jurisprudence. While the administrative process, which is a recent but necessary development in the Anglo-American system of law, differs in many respects from the judicial process, nevertheless, the indispensable principle that a case must not be prejudged by the tribunal that is going to hear and decide it, must of necessity govern both.

 During the interval between the first and second argument on the pending motions, the Board on July 11, 1962 amended its original order by attempting to eliminate the word 'termination' but, nevertheless, repeated its directions for an investigation in order to accomplish the same result, 'in accordance with the tentative conclusions set forth in the attached study'. The 'tentative conclusions' remained unchanged. Consequently, the second order of the Board has not materially changed the issues of the proceeding.

 The plaintiff brought this action for a declaratory judgment and injunctive relief, claiming that the Board lacked legal power to terminate the plaintiff's certificate. The defendant moved to dismiss the complaint on the ground that the action was premature, in that the plaintiff had failed to exhaust its administrative remedies. By changing its motion to one for summary judgment, the Government expanded its contentions to include an assertion that on the merits the Board had the power to do what it proposed to accomplish, namely, to eliminate the plaintiff as an air carrier on the route between Seattle, Washington and Fairbanks, Alaska. Leave to intervene as a party defendant has been granted to Alaska Airlines, Inc.

 This brings us to a consideration of the pertinent statutory provisions. An air carrier, being regarded as a public utility, may engage in air transportation only on the basis of a certificate of public convenience and necessity issued by the Civil Aeronautics Board, 49 U.S.C.A. § 1371. Such a certificate is analogous to a franchise. The Congress reserved to the Board a limited degree of control over it. Provisions to this effect are found in 49 U.S.C.A. § 1371(g):

 '(g) The Board upon petition or complaint or upon its own initiative, after notice and hearings, may alter, amend, modify, or suspend any such certificate, in whole or in part, if the public convenience and necessity so require, or may revoke any such certificate, in whole or in part, for intentional failure to comply with any provision of this subchapter or any order, rule, or regulation issued hereunder or any term, condition, or limitation of such certificate: Provided, That no such certificate shall be revoked unless the holder thereof fails to comply, within a reasonable time to be fixed by the Board, with an order of the Board commanding obedience to the provision, or to the order (other than an order issued in accordance with this proviso), rule, regulation, term, condition, or limitation found by the Board to have been violated. Any interested person may file with the Board a protest or memorandum in support of or in opposition to the alteration, amendment, modification, suspension, or revocation of the certificate.'

 Analyzing this section, we find that authority of two types is conferred on the Board over certificates, with certain restrictions and limitations in each instance. First, the Board may, after notice and hearing, alter, amend, modify, or suspend any certificate, in whole or in part, if the public convenience and necessity so require. Second, the Board, after notice and hearing, may revoke any certificate, in whole or in part, for intentional failure to comply with the law or with any order, rule or regulation issued thereunder, or any term, condition, or limitation of the certificate. The revocation must be preceded by an order of the Board commanding obedience to the provision, order, rule, regulation, term, condition, or limitation found to have been violated. Thus, while the Board may alter, amend, modify, or suspend a certificate on grounds of public convenience and necessity, it may not revoke any certificate except on charges and then only after an opportunity is granted to cure the violations found as the basis for the charges. There is no authority to terminate, cancel, or in any other way, to deprive the carrier of a certificate. It is clear that this omission is not an inadvertence. A certificate of public convenience and necessity, like any other franchise, is valuable property and should not be lightly dealt with, once the certificate holder starts operations, which necessarily involve a considerable investment of funds and create employment. It is obvious that the Congress intended to limit and restrict the power of the administrative agency to deprive an air carrier of its route.

 That the statutory limitations were intentional, is demonstrated by the provision dealing with foreign air carriers, 49 U.S.C.A. § 1372(f). The Board was expressly authorized by the Congress to alter, modify, amend, suspend, cancel or revoke a permit issued to a foreign air carrier, whenever it found such action to be in the public interest. In other words, while a permit issued to a foreign air carrier may be cancelled or revoked by the Board in the public interest, a certificate of a domestic air carrier may be revoked only on charges.

 The authorities on this point are few, but they clearly sustain this interpretation of the statute.

 In Alaska Airlines, Inc. v. C.A.B., 109 U.S.App.D.C. 230, 231, 285 F.2d 672, 673, the Court of Appeals for the District of Columbia Circuit expressly recognized the difference between the power of the Board to alter, amend, modify, or suspend a certificate on the one hand, and to revoke it on the other. In this point the Court made the following statement:

 'The statute gives the Board authority to 'alter, amend, modify, or suspend' a certificate, if the public convenience and necessity so require. It gives the Board authority to revoke only for intentional failure to comply with a statutory provision, or with a rule, regulation or order, or with a condition in the certificate.'

 In United Air Lines, v. C.A.B., 198 F.2d 100, the Court of Appeals for the Seventh Circuit, likewise explicitly distinguished the broad power of the Board to amend, modify, or suspend a certificate, from the limited authority to revoke it only on ...


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