Source: https://law.justia.com/cases/federal/appellate-courts/F2/756/1304/162152/
Timestamp: 2020-02-21 23:09:02
Document Index: 148403192

Matched Legal Cases: ['§ 1384', '§ 1382', '§ 1382', '§ 1382', '§ 1828', '§ 1384', '§ 557', '§ 1382', '§ 552', '§ 556', '§ 1382', '§ 1382']

Republic Airlines, Inc., Petitioner, v. Civil Aeronautics Board, Respondent.american Express Travel Related Services, Associated Travelnationwide, Intervenors.american Society of Travel Agents, Inc., Petitioner, v. Civil Aeronautics Board, Respondent.national Passenger Traffic Association, Intervenor.air Traffic Conference of America, a Division of Airtransport Association of America, Petitioner, v. Civil Aeronautics Board, Respondent.international Air Transportation Association, Petitioner, v. Civil Aeronautics Board, Respondent.association of Retail Travel Agents, Petitioner, v. Civil Aeronautics Board, Respondent, 756 F.2d 1304 (8th Cir. 1985) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Eighth Circuit › 1985 › Republic Airlines, Inc., Petitioner, v. Civil Aeronautics Board, Respondent.american Express Travel...
Republic Airlines, Inc., Petitioner, v. Civil Aeronautics Board, Respondent.american Express Travel Related Services, Associated Travelnationwide, Intervenors.american Society of Travel Agents, Inc., Petitioner, v. Civil Aeronautics Board, Respondent.national Passenger Traffic Association, Intervenor.air Traffic Conference of America, a Division of Airtransport Association of America, Petitioner, v. Civil Aeronautics Board, Respondent.international Air Transportation Association, Petitioner, v. Civil Aeronautics Board, Respondent.association of Retail Travel Agents, Petitioner, v. Civil Aeronautics Board, Respondent, 756 F.2d 1304 (8th Cir. 1985)
U.S. Court of Appeals for the Eighth Circuit - 756 F.2d 1304 (8th Cir. 1985) Submitted Feb. 13, 1984. Decided March 12, 1985
The Airline Deregulation Act of 1978, Pub. L. No. 95-504, 92 Stat. 1705 (codified as amended in scattered sections of 49 U.S.C.) (ADA) represents a fundamental change in the perspective of the federal government toward the airline industry. With the passage of the ADA, the airlines, which had been subject since 1938 to pervasive price, routing, and marketing regulations, were freed to compete with one another in those areas. In the last six years many changes have taken place as the airlines have sought their way in a competitive environment. Results of deregulation include the airlines' use of fare discounts to attract customers, the advent of new "no frills" carriers offering inexpensive air transportation, and the airlines' exercise of their new freedom to enter or leave route markets as they see fit.
Before passage of the ADA, the airlines were required to submit all joint operating agreements, such as those under review here, to the Board for approval. Anticompetitive agreements could be approved by the Board if they were found to secure important public benefits or to meet serious transportation needs. Anticompetitive agreements thus approved by the Board were entitled to antitrust immunity, which the Board had no discretion to deny. The ADA made two significant changes in this process. First, submission of joint operating agreements to the Board was made optional instead of mandatory. Second, the entitlement to antitrust immunity was limited; mandatory immunity was eliminated but the Board was granted the authority to confer discretionary immunity. In 1980, Congress amended the statute reinstating the entitlement to mandatory immunity in limited circumstances. See International Air Transportation Competition Act of 1979, Pub. L. No. 96-192, Sec. 27, 94 Stat. 35, 47-48 (1980), (codified at 49 U.S.C. § 1384) (IATCA). Most of the agreements in question initially had been approved by the Board before the ADA was enacted. This approval carried with it automatic antitrust immunity. Post-ADA amendments to the agreements, however, were before the Board for its approval at the time of the September 13 initiating order. The Board elected to deal with all the agreements and pending amendments in the proceeding set in motion by its initiating order.
The Board reviewed the agreements as required by 49 U.S.C. § 1382(a) (2) (A) (i) to determine if any of their provisions substantially reduced competition. The result of this review was the Board's disapproval as anticompetitive of several provisions of the agreements. The Board disapproved outright the exclusivity provisions which foreclosed the ASP to unaccredited agents and the provisions containing IATA's ban on in-airport travel agencies. The Board disapproved outright the balance of the exclusivity provisions insofar as they related to online sales, i.e., sales involving travel only on one airline, that airline being the agent's principal. Additionally, the Board disapproved as being anticompetitive the exclusivity provisions regarding interline sales, but nonetheless temporarily allowed those provisions to continue during a transitional period lasting until December 31, 1984. The Board deferred until December 31, 1984 its disapproval of the provisions preventing BTDs from becoming accredited agents in order to give the airlines an opportunity to fashion an alternative method of compensating BTDs for the work they perform in preparing and processing tickets. The Board found that none of the disapproved exclusivity provisions was necessary to meet serious transportation needs or to secure important public benefits.
The last significant effect of the Board's order was to open the ASP to unaccredited agents. The Board held that to bar access to this low cost, efficient system of settling airline/agent debts clearly would be anticompetitive since it viewed the ASP as an essential facility of commerce under Associated Press v. United States, 326 U.S. 1, 65 S. Ct. 1416, 89 L. Ed. 2013 (1945).
In its substantive aspects, this case turns on whether the Board orders that petitioners' challenges are authorized by the ADA and the 1980 amendments to that act. The Board is entitled to considerable deference in interpreting the statutes under which it operates. Northwest Airlines, Inc. v. Goldschmidt, 645 F.2d 1309, 1315 (8th Cir. 1981). We are not called on to determine the best interpretation of the statute, but only to determine if the Board's interpretation is " 'sufficiently reasonable' to be accepted by a reviewing court." Federal Election Commission v. Democratic Senatorial Campaign Committee, 454 U.S. 27, 39, 102 S. Ct. 38, 46, 70 L. Ed. 2d 23 (1981); see also Train v. Natural Resources Defense Council, Inc., 421 U.S. 60, 75, 95 S. Ct. 1470, 1479, 43 L. Ed. 2d 731 (1975).
The provisions of the ADA and the IATCA under which the Board's review of the airlines' agreements took place are found at 49 U.S.C. §§ 1382, 1384.6 These statutes spell out the circumstances under which the Board may approve agreements and grant antitrust immunity to airlines for the purpose of entering joint operating agreements, such as the ones in question here. Submission of such agreements to the Board is no longer mandatory; however, the agreements considered here received initial approval under the former statute. See supra p. 1309.
Section 1382 gives the Board the power to review agreements and to approve or disapprove them. The Board may not approve an anticompetitive agreement unless it finds that the agreement is necessary to "meet a serious transportation need or to secure important public benefits, including international comity or foreign policy considerations, and it does not find that such need can be met or such benefits can be secured by reasonably available alternative means...." 49 U.S.C. § 1382(a) (2) (A) (i). The provisions of Sec. 1382(a) (2) (A) (i) may be paraphrased as presenting three separate questions:
In this case, the Board severed and disapproved the provisions it found to be anticompetitive and proceeded to review the balance of the agreements. Finding the agreements absent the disapproved provisions to be procompetitive, the Board approved the agreements without making public benefits findings under Sec. 1382(a) (2) (A) (i). Petitioners challenge this method of analysis, asserting that the Board is not empowered to excise anticompetitive provisions without first making a finding as to public benefits under Sec. 1382(a) (2) (A) (i). Petitioners assert that if the Board had entered this phase of the analysis, it would have concluded that the excised provisions are necessary and in the public interest and thus would have approved them. We disagree with the petitioners' legal argument, and we believe that the related question of the Board's determination that the provisions are not needed to preserve the benefits of the agreements is supported by substantial evidence.
The courts have upheld the power of the Board to condition its approval on the acceptance of changes in an agreement. See, e.g., National Air Carrier Association v. C.A.B., 436 F.2d 185, 190-91 (D.C. Cir. 1970); McManus v. C.A.B., 286 F.2d 414, 419 (2d Cir.), cert. denied, 366 U.S. 928, 81 S. Ct. 1649, 6 L. Ed. 2d 388 (1961); cf. Frontier Airlines, Inc. v. C.A.B., 621 F.2d 369 (10th Cir. 1980) (Board's authority to approve or disapprove proposed termination in airline service to a community includes power to grant termination only on specific conditions). The Board's action in the instant case is logically consistent with that approach and is a reasonable interpretation of the statute.
Petitioners also assert that even if the Board has the power to excise anticompetitive provisions from an agreement, it only may do so following a public interest analysis under Sec. 1382(a) (2) (A) (i). We do not agree. Under our reading of the statute, a public benefits analysis is required only if an anticompetitive provision is to be approved as being necessary to meet a serious transportation need or to secure important public benefits. The Board found that the exclusivity provisions raised serious antitrust concerns, but also found that these provisions were not needed to preserve the benefits of the agreements. We find the Board's determination to be supported by substantial evidence in the record and that its methodology is based upon a proper construction of the statute.
Petitioners assert that the agreements are entitled to antitrust immunity under the mandatory immunity provisions of Sec. 1384. This provision requires an antitrust exemption pursuant to the analysis conducted under Sec. 1382(a) (2) (A) (i) "to the extent necessary to enable such person to proceed with the transaction specifically approved...." Petitioners argue that they will not enter the agreements without antitrust immunity, and that because the agreements produce public benefits, antitrust immunity should be granted.
A limited mandatory immunity provision was reinstated to the Board's governing statute by the IATCA. It applies in situations where the Board determines that an agreement, though clearly anticompetitive, should be approved in the public interest. This may arise when the Board, having performed the analysis required by Sec. 1382(a) (2) (A) (i) for anticompetitive provisions which secure important public benefits, has determined that, even though an agreement substantially lessens competition, the public benefits secured by the agreement outweigh the antitrust concerns. This method of analysis is similar to the Bank Merger Act test, 12 U.S.C. § 1828, under which a bank merger, though anticompetitive, may be approved and immunized from the antitrust laws if it is found that the anticompetitive concerns are "clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served." Id. at (c) (5) (B); See H.R.Conf.Rep. No. 716, 96th Cong.2d Sess. 23 reprinted in 1980 U.S.Code Cong. & Ad.News 78, 85.
The Board has found that the benefits of common accreditation are available without the anticompetitive restraints of exclusivity. Except for the transitional antitrust immunity required for the BTD and interline exclusivity provisions, both the Board and the ALJ determined that the mandatory immunity provisions of Sec. 1384 were not applicable to the agreements here approved by the Board. The ALJ did confer discretionary immunity to the agreements, but the Board found that such immunity is not necessary for the parties to proceed with the agreements as modified. The Board recognized that antitrust concerns are present, but found that the agreements as modified do not substantially reduce competition or raise a serious risk of antitrust litigation. Antitrust immunity is appropriate only when antitrust litigation poses a serious threat to the continued operation of an agreement that produces important public benefits. It is not realistic to expect a flood of antitrust lawsuits attacking a substantially procompetitive agreement. Moreover, the statute requires antitrust immunity only "to the extent necessary to enable [the parties] to proceed with the transaction specifically approved by the Board." 49 U.S.C. § 1384 (emphasis added). Here, the agreements approved by the Board were found to be essentially procompetitive and not found to raise serious antitrust concerns. Under such circumstances, antitrust immunity is not necessary for the parties to proceed with the transaction. See supra n. 5.
It is apparent that much of the petitioners' disagreement is with the Board's forecasts of the results of its decision. For example, in reaching the conclusion that the withdrawal of exclusivity would not cause the airlines to abandon the common accreditation system, the Board made a factual determination "primarily of a judgmental or predictive nature." FCC v. National Citizens Committee for Broadcasting, 436 U.S. 775, 813, 98 S. Ct. 2096, 2121, 56 L. Ed. 2d 697 (1978). When making such a determination, "complete factual support in the record for the [Board's] judgment or prediction is not possible or required; 'a forecast of the direction in which future public interest lies necessarily involves deductions based on the expert knowledge of the agency.' " Id. at 814, 98 S. Ct. at 2121 (quoting FPC v. Transcontinental Gas Pipe Line Corp., 365 U.S. 1, 29, 81 S. Ct. 435, 450, 5 L. Ed. 2d 377 (1961)). The Board's forecasts must be accepted if they are "rational, based on a consideration of all the relevant factors, and adequately explained." National Small Shipments Traffic Conference, Inc. v. CAB, 618 F.2d 819, 830 (D.C. Cir. 1980). After reviewing the Board's decision, we are satisfied that the Board's forecasts of the results of its decision satisfy the foregoing test and therefore must be accepted.
We find no merit in petitioners' suggestions that the Board's decision is suspect because it differs in some significant ways from the decision reached by the ALJ. This case does not turn on any issues of credibility. Cf. Ward v. NLRB, 462 F.2d 8, 12 (5th Cir. 1972). Accordingly, the Board is not required to accord a high degree of significance to the ALJ's decision. See Universal Camera Corp. v. NLRB, 340 U.S. 474, 496, 71 S. Ct. 456, 468, 95 L. Ed. 456 (1951). Instead, it is the Board's responsibility to make findings of fact and to decide the matter; if substantial evidence supports both the ALJ's result and the Board's result it is the Board's choice that governs. See Greater Boston Television Corp. v. FCC, 444 F.2d 841, 853 (D.C. Cir. 1970), cert. denied, 403 U.S. 923, 91 S. Ct. 2233, 29 L. Ed. 2d 701 (1971). In any event, there is here no real inconsistency between the ALJ's factual analysis and the Board's decision. The Board considered the same facts that the ALJ considered, but it brought to those facts a different vision of the future and of the requirements of the procompetitive policy mandated by Congress. We find the Board's conclusions to be rational and adequately supported by the record.
Petitioners contend that by receiving memoranda and advice from its staff regarding the issues in the case, the Board bypassed the ALJ and rendered the proceedings, and his decision, meaningless. Petitioners contend that such actions on the part of the Board violate the APA, 5 U.S.C. § 557(b), which they read as requiring the Board to wait until the ALJ has decided the matter before considering the issues in the case. Without deciding whether petitioners' reading of Sec. 557(b) is correct, the simple answer to their argument is that this section of the APA applies only to situations in which a formal hearing is required for the agency action being considered. See id. Sec. 557(a). No such hearing is required for the agency action here in question. See 49 U.S.C. § 1382(a).
Petitioners further argue that discussions between Board members and Board staff concerning the case during the period prior to the Board's hearing violated 5 U.S.C. § 552b, commonly known as the Sunshine Act. That provision requires that, with certain exceptions not relevant here, all deliberation on and disposition of agency business be conducted in public. Petitioners allege that between August and December of 1982, nineteen meetings were held between Board members and staff concerning the case. There never were more than two members of the Board present at any of these meetings. 100 C.A.B. at 443-44 (1983). In addition, various memoranda, including a draft of a proposed opinion by the Board, were circulated among the members of the Board prior to any public hearing by the Board as a whole. Petitioners contend that through these actions the Board reached its decision in secret prior to the December 9 and 16 meetings, thus shielding the decision-making process from the full scrutiny of a public hearing. We disagree.
Even assuming arguendo that Chairman McKinnon's comment constituted consideration of extra-record evidence in contravention of 5 U.S.C. § 556(e), such consideration does not require reversal unless the petitioners were substantially prejudiced thereby. United States v. Pierce Auto Freight Lines, Inc., 327 U.S. 515, 530, 66 S. Ct. 687, 695, 90 L. Ed. 821 (1946). Significant evidence was presented in the administrative hearings pointing out the potential for agents to use their market power in retaliation against airlines for changes in marketing strategy. See J.A. at 973-76, 1001-08. Evidence also was presented at the hearings that the travel agents had used their market power to oppose United Airlines' effort to adopt an adjustment in commission rates for agent ticket sales. See J.A. at 1103-04. In light of this additional evidence which was before the Board, see Order 83-3-127, J.A. at 465, we conclude that the reference to Braniff was merely cumulative or illustrative and thus did not substantially prejudice the petitioners.
The majority opinion proceeds on the premise that the Board's order is the inevitable result of the Airline Deregulation Act, which "represents a fundamental change in the perspective of the federal government toward the airline industry." See supra p. 1307. Fundamental as this change may be, it did not concern the travel agent system. Congress made it clear that it did not intend to deregulate all aspects of the industry. See, e.g., H.Rep. No. 95-1211, 95th Cong., 2d Sess. 4, reprinted in 1978 U.S.Code Cong. & Ad.News 3737, 3739-40 ("While the committee has by no means concluded that total deregulation is desirable, we are persuaded that it is time for a moderate, controlled release of some regulatory fetters."); id. at 5-6, 1978 U.S.Code Cong. & Ad.News at 3741 (" [The statute's revised policy statement] directs the Board to stress competition, low-fare service, entry by new carriers, and avoidance of industry concentration.").
When it came to considering the inter-airline marketing agreements, Congress preserved a structure of regulatory review. It considered and rejected proposals to remove antitrust immunity. See Regulatory Reform in Air Transportation: Hearings Before the Subcomm. on Aviation, Senate Committee on Commerce, Science and Transportation, 95th Cong., 1st Sess. 206 (1977) (Testimony of John E. Robson, Chairman, CAB). It also considered and rejected a proposal to require de novo antitrust review of such agreements. See Oversight of Civil Aeronautics Board Practices and Procedures: Hearings Before the Subcomm. on Administrative Practice and Procedure of the Senate Committee on the Judiciary, 94th Cong., 1st Sess. 1738-40, 1750-52 (1975) (Testimony of Donald I. Baker, Dep. Asst. Attorney General, Department of Justice). Instead, Congress selectively prohibited certain agreements regarding capacity level and price fixing. See 49 U.S.C. § 1382(a) (2) (A) (iii). All other agreements it made subject to Board review in order to receive antitrust immunity. The legislative history indicates that Congress was aware of the travel agent inter-airline agreements now before the Court, and expected these agreements to be placed on the antitrust public interest balance. S.Rep. No. 95-631, 95th Cong., 2d Sess. 82 (1978) ("The bill requires that other agreements meet a public interest balancing test similar to that required under section 408 before antitrust immunity is conferred. The public interest balancing test would apply, for example, to those agreements covering baggage, ticketing, and travel agent arrangements.") (emphasis added). Thus, Congress did not intend that the inter-airline marketing agreements and travel agent system be subjected to the deregulatory changes affecting fare and route determinations. Moreover, I conclude from the legislative history that Congress intended continued antitrust immunity for these agreements so long as they serve the public interest--precisely because the existing system promotes easy entry by new carriers, avoidance of industry concentration, and Congress's other deregulation goals.
(i) the Board may not approve or, after periodic review, continue its approval of any such contract, agreement, or request * * * which substantially reduces or eliminates competition, unless it finds that the contract, agreement, or request is necessary to meet a serious transportation need or to secure important public benefits, including international comity or foreign policy considerations, and it does not find that such need can be met or such benefits can be secured by reasonably available alternative means having materially less anticompetitive effects [.]
49 U.S.C. § 1382(a) (2) (A).
The majority opinion asserts that the Board's excision of anticompetitive provisions is consistent with past Board practice and is supported by court decisions. Several cases have supported the Board's power to condition its approval of an agreement on the incorporation of certain amendments. See, e.g., Frontier Airlines, Inc. v. C.A.B., 621 F.2d 369, 371-72 (10th Cir. 1980); National Air Carrier Association v. C.A.B., 436 F.2d 185, 190-91 (D.C. Cir. 1970). But none of the cited decisions support the Board's practice in this case. National Air Carrier, for example, only held that the Board could approve an agreement for less than the full term proposed. 436 F.2d at 190-91. Frontier Airlines simply held that the Board had the power to require a carrier to provide temporary backup service to certain smaller communities--as a logical corollary of its statutory power to order a carrier to continue existing service to those communities. 621 F.2d at 371-72.
(2) (A) The Board shall by order disapprove any contract, agreement, or request filed pursuant to paragraph (1) of this subsection, whether or not previously approved by it, that it finds to be adverse to the public interest or in violation of this chapter, and shall by order approve any contract, agreement, or request, or any modification or cancellation thereof, that it does not find to be adverse to the public interest, or in violation of this chapter, except that--
(B) In any proceeding before the Board involving the application of the standards set forth in subparagraph (A) (i) of this paragraph, the party opposing the proposed contract, agreement, or request shall have the burden of proving the reduction or elimination of competition, and the availability of alternative means having less anticompetitive effects, and the party defending the proposed contract, agreement, or request shall have the burden of proving transportation need or public benefits.
In any order made under section 1378, 1379, or 1382 of this title, the Board may, as part of such order, exempt any person affected by such order from the operations of the "antitrust laws" set forth in subsection (a) of section 12 of Title 15 to the extent necessary to enable such person to proceed with the transaction specifically approved by the Board in such order and those transactions necessarily contemplated by such order, except that the Board may not exempt such person unless it determines that such exemption is required in the public interest. Notwithstanding the preceding sentence, on the basis of the findings required by subsection (a) (2) (A) (i) of section 1382 of this title, the Board shall, as part of any order under such section which approves any contract, agreement, or request or any modification or cancellation thereof, exempt any person affected by such order from the operations of the "anti-trust laws" set forth in subsection (a) of section 12 of Title 15 to the extent necessary to enable such person to proceed with the transaction specifically approved by the Board in such order and with those transactions necessarily contemplated by such order.