Source: https://openjurist.org/336/us/601
Timestamp: 2019-04-26 14:36:47+00:00

Document:
Argued Feb. 8, 9, 1949.
Mr. Emory T. Nunneley, Jr., of Washington, D.C., for respondent.
The Board in an order dated October 26, 1945, fixed a mail rate of 45 cents per mail ton-mile for petitioner.2 From that date until March 14, 1947, petitioner was paid at that rate for its air carrier services. During that time no action was taken by petitioner or by the government to initiate a change in that rate. On March 14, 1947, petitioner filed a petition with the Board alleging that its mail rate had not been fair and reasonable since January 1, 1946, and requesting the Board to fix a fair and reasonable rate 'from and after January 1, 1946.' After hearing the Board by a divided vote ruled that it had no authority to fix a mail rate for a period prior to March 14, 1947, and dismissed the petition insofar as it sought that relief. 8 C.A.B. 685. The Court of Appeals affirmed the order of the Board. 169 F.2d 893. The case is here on a petition for a writ of certiorari which we granted because of the importance of the question to the carriers and public alike.
The language of § 406(a) which empowers the Board to 'fix and determine' after notice and hearing 'the fair and reasonable rates of compensation' for the transportation of mail by aircraft3 reads like a typical public utility rate-making authority. Both subdivisions (a) and (b) of § 406, to be sure, reflect some characteristics of ratemaking which are peculiar to air carriers. That is true of the methods specified in § 406(a) for ascertaining the rates of compensation—'aircraft-mile, pound-mile, weight, space, or any combination thereof, or otherwise * * *.' Special standards for rate-making are also prescribed. The Board is authorized to consider 'the conditions peculiar to transportation by aircraft and to the particular air carrier or class of air carriers' in fixing different rates for different air carriers or classes of air carriers and different classes of service. § 406(b). And the Board in determining the rate is authorized and directed to consider 'the need of each such air carrier for compensation for the transportation of mail sufficient to insure the performance of such service, and, together with all other revenue of the air carrier, to enable such air carrier under honest, economical, and efficient management, to maintain and continue the development of air transportation to the extent and of the character and quality required for the commerce of the United States, the Postal Service, and the national defense.' § 406(b).
Considerable reliance is placed on this last provision for the view that the Board has authority under the 'make effective' clause to order such retroactive adjustments of rates as the 'need' of the air carrier makes appropriate. But such a standard has its counterparts in other legislation dealing with rate-making4 and does not necessarily mark a departure from the customary pattern of fixing rates prospectively. Yet, unless we found a congressional purpose to make a radical break with tradition, we would be most reluctant to give the 'make effective' clause the broad meaning which petitioner urges. For the rates of carriers and other utilities fixed by public authorities, while usually prospective, are sometimes made retroactive to the date of the commencement of the ratemaking proceeding. See United States v. New York Central R. Co., 279 U.S. 73, 49 S.Ct. 260, 73 L.Ed. 619. But, so far as we are aware, they have never been retroactive to an earlier date.
The language of the Act does not suggest that Congress intended to break with these traditions of rate-making.5 Moreover, the legislative history indicates that the 'make effective' clause was inserted only to make clear that the rates could be made retroactive to the date of the application.6 Finally the scheme of the Act and its underlying policy seem to us to preclude the more expansive reading of the clause urged on us by petitioner.
Petitioner's reading of the Act would in practical effect have the tendency to transform it into a cost-plus system of regulation, a construction which would not harmonize with the apparent design of the Act. Thus § 406(b) authorizes the Board to fix rates for 'classes of air carriers.'7 It is plain that the uniform rate for the class is an important regulatory device. For § 2(d) of the Act looks to the sound development of an air transportation system through competition.8 A uniform rate forces carriers within a given class to compete in securing revenue and in reducing or controlling costs. If the Board had authority on the basis of the carrier's needs to make rates retroactive to any point of time, there would be a powerful incentive to seek relief from the uniform rate, not to live within it.
It is pointed out that the Board apparently considers past operating losses in fixing rates9 and that therefore it is a matter of no great consequence if the rates are made retroactive to one date rather than another. But the power to fix rates to recoup past losses is a distinct question not before us.
The fundamental premise of the Court's opinion is that the function of the Board in fixing the air-mail rate is analogous to rate-making for a railroad or a public utility. The two types of rates are not comparable. 'Rate' as applied to the Government's air-mail payments is an euphemism to embrace a subsidy as well as compensation. The statute requires the Board, in fixing the 'rate' for transportation of mail, to take into consideration the 'need of each such air carrier for compensation * * * to insure the performance of such service, * * * and to enable such air carrier * * * to maintain and continue the development of air transportation to the extent and of the character and quality required for the commerce of the United States, the Postal Service, and the national defense.' § 406(b). These considerations are inappropriate in applying ordinary utility rate-making principles. Moreover, utility rates apply to a multitude of customers; the air-mail rate is paid by only one—the Government. Utility services must be paid for currently; air-mail payments can be and are being paid in lump sums on account of items long past.
Congress, in the Act before us, set up a scheme for dealing with each according to its separate nature. The rate for public carriage of passengers and goods by air lines, of course, cannot be fixed retroactively on the basis of experience, for the public must know at the time they take service hat they are to pay for it and the carrier must collect then or never. The Act recognizes this necessity with respect to passengers and cargo. Rates for transporting them are required by § 403, 49 U.S.C.A. § 483, to be embodied in filed and published tariffs, which may be altered only after hearing and notice and only prospectively. Section 1002 provides that the Board may institute proceedings to modify these rates and may, after prescribed procedures, set the rates thereafter to be charged. Thus, when Congress was dealing with utility rates for passengers and shippers, it permitted only prospective changes, and said so.
But Congress believed that, in the interest of the national defense and commercial aviation, it had to subsidize pioneering air lines and underwrite revenues above those to be realized from passenger and cargo carriage. A feasible way to do it was through air-mail payments. Its plan to that effect was detailed in § 406. But as to this subsidy rate, it enacted no prohibition against retroactivity and, if it had, it is difficult to see how the Board would have authority to go back even to the date of the petition. On the contrary, however, § 406(a) empowers and directs the Board to determine the air-mail rate and 'to make such rates effective from such date as it shall determine to be proper.' I see no justification for holding that this language means anything less than just what it says, or for holding that two such opposite kinds of payments must be governed by identical rules.
The Civil Aeronautics Board, however, asks us to hold that the same rules as to retrospective rates are 'applicable equally to mail, passenger and property rates under the Act.' It urges that its provisions do not 'convert the Board's primary function of fixing rates of compensation for the future into a duty to award amounts of compensation for the past' and that, if it sets too low a rate, 'the carrier has no redress save a new hearing and the fixing of a more adequate rate for the future.' It contends for application of decisions by which this Court 'has refused to require the capitalization of past losses in the rate base for the purpose of fixing future rates' or to allow 'current reimbursement out of new rates of deficiencies arising from a failure to earn a reasonable return in past years, or the capitalization of costs of maintaining excess capacity during early periods of operation.' And the Board argued that it has adhered to such rules and advances policy reasons why we should hold that it is without power to do otherwise.
What I get from the Board's orders and statements is that it is acting in a spirit completely contrary to its argument to this Court and to this Court's opinion, even if there may be a technical consistency, which I doubt. It appears to have authorized capitalization of losses for periods before any rate petition was filed and the amortization of those losses from subsidy payments afterward. I find far less statutory authorization for such a device for carrying losses forward into current rates than for forthright fixing of effective rates from such prior date as shall be proper. If the need for retroactivity is so imperative that it must be met by evasion, the policy arguments of the Board against construing the statute to permit retroactivity fail. I do not know that these matters of policy should influence the Court in any event, but if they do, my own predilections, unlike the Court's, favor fixing the subsidy on experience rather than on prophecy. In the light of what appears to be the practice, I see no reason why the statute should not be applied so as to carry out what its language conveys and why the subsidy rates should not be regarded as always tentative and subject to revision either to meet unforeseen contingencies or to recapture excessive payments. The Commission would no more be bound to reimburse extravagant management or improvident outlay after it has occurred than to allow for it in advance. In fact, excessive expense would probably be easier to detect in actual statements of operations than in estimates.
'(a) The Authority is empowered and directed, upon its own initiative or upon petition of the Postmaster General or an air carrier, (1) to fix and determine from time to time, after notice and hearing, the fair and reasonable rates of compensation for the transportation of mail by aircraft, the facilities used and useful therefor, and the services connected therewith (including the transportation of mail by an air carrier by other means than aircraft whenever such transportation is incidental to the transportation of mail by aircraft or is made necessary by conditions of emergency arising from aircraft operation), by each holder of a certificate authorizing the transportation of mail by aircraft, and to make such rates effective from such date as it shall determine to be proper; (2) to prescribe the method or methods, by aircraft-mile, pound-mile, weight, space, or any combination thereof, or otherwise, for ascertaining such rates of compensation for each air carrier or class of air carriers; and (3) to publish the same; and the rates so fixed and determined shall be paid by the Postmaster General from appropriations for the transportation of mail by aircraft.
The other rate-making provisions of the Act likewise follow the conventional pattern. See § 1002(d) and (e), 49 U.S.C.A. § 642(d, e).
The Interstate Commerce Commission in its administration of the Air Mail Act of 1934 as amended, 48 Stat. 933, 935, 49 Stat. 614, 616, 39 U.S.C.A. § 469 et seq., had asserted the power to make its orders effective as of the date of initiation of the proceeding. But there was a sharp divergence of views within the Commission over its authority to do so. See Air Mail Compensation, 216 I.C.C. 166, 222 I.C.C. 602. The congressional committees seemed primarily concerned with that problem in their consideration of the 'make effective' clause in the bills which preceded the ones resulting in the Act. See S. Hearings, Committee on Interstate Commerce, S. 2 and S. 1760, 75th Cong., 1st Sess. 179, 180, 239, 291, 343, 483—485, 523. And see H.R. Hearings, Committee on Interstate and Foreign Commerce, H.R. 5234 and H.R. 4652, 75th Cong., 1st Sess. 325—327. The policy of adhering to conventional rate-making is suggested by H.R. Rep. No. 911, 75th Cong., 1st Sess. 18, and by the statements of Senator Truman who was in charge of the bill in the Senate. 81 Cong.Rec. 9202, 9204.
§ 406(b) supra note 1.
'(d) Competition to the extent necessary to assure the sound development of an air-transportation system properly adapted to the needs of the foreign and domestic commerce of the United States, of the Postal Service, and of the national defense * * *.' 49 U.S.C.A. § 402(d).
After the present case was argued in this Court, the Civil Aeronautics Board, on February 21, 1949, awarded a temporary mail rate, increase to TWA effective March 14, 1947, to compensate it for losses sustained prior thereto as the result of grounding the Constellation aircraft. American Airlines, Inc., et al., Mail Rate Increases, C.A.B. Docket No. 2849, Serial No. 3-2484 (Feb. 21, 1949). That action does not render the present case moot, for the new temporary mail rate covers only a part of the losses on the basis of which a rate increase was sought here. Nor do we have in this case any question concerning the power of the Board over temporary, as distinguished from final, mail rates. See Essair, Inc., Temporary Mail Rate, 6 C.A.B. 687, 690—691; In the Matter of National Airlines Inc., Docket No. 3037, Serial No. E1271, March 5, 1948.

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