LEVENTHAL, Circuit Judge:
On August 7, 1964, the Civil Aeronautics Board,
The CAB's regulation was the culmination of a rule making proceeding (Docket 14148), held pursuant to notice of January 23, 1964, and supplemental notice of June 22, 1964. All interested parties had opportunity, of which petitioners availed themselves, to present their positions to the Board through oral arguments as well as written data, views, and rebuttals. The procedure followed by the Board admittedly complies fully with the requirements for rule making established in section 4 of the Administrative Procedure Act, 5 U.S.C. § 1003. The question before us is whether this regulation effected a modification of petitioners' existing certificates which, under § 401(g) of the Federal Aviation Act, 49 U.S.C. § 1371(g), may be accomplished only after a full adjudicatory hearing. We hold that the regulation was validly issued.
The Board's policy statements in Regulation PS-24, essentially legislative findings and conclusions in support of its decision,
The Board considered that its statutory responsibility to promote air transportation required it to pursue earliest possible achievement of the breakthrough, and that this depended on assigning the exclusive role of perfecting blocked space service to the specialized all-cargo carriers.
Of particular interest and significance were the following findings and conclusions:
1. Petitioners say that the Board has no power by summary action, without hearing, to prevent a carrier or group of carriers from competing fully with other carriers. Their reliance on a "fundamental principle" that carriers should be able to compete with each other, though couched here in procedural terms, has overtones of an argument on the merits. At the outset we reject the sweeping argument, if that argument is being made or implied, that such agency action would be invalid even if taken after the most elaborate of procedures. That competitors in a regulated industry should be treated similarly in rate rulings in order to preserve competition is not denied. But that is not to say that reasonable distinctions between groups of competitors are impermissible, and that different services and rates may not then be authorized for the different groups or classes. Congress made a broad delegation of power to the Board, in § 416(a) of the Act (49 U.S.C. § 1386(a)), to "establish such just and reasonable classifications or groups of air carriers * * * as the nature of the services performed by such air carriers shall require."
Petitioners have made no presentation that the Board's distinction between combination carriers and all-cargo carriers is meaningless or without rational foundation. Congress has given the Board not only a wide regulatory authority, but a specific promotional function to initiate proposals for the purpose of expanding efficient civil aviation transport;
2. Petitioners claim that § 401(g) of the Federal Aviation Act, 49 U.S.C. § 1371(g), assures them an "adjudicatory hearing" because the Board action amounts to a modification or suspension of existing rights under their certificates of public convenience and necessity.
In essence, petitioners' argument is the same as the thesis this court accepted ten years ago in the Storer case,
Petitioners argue that the Storer doctrine is restricted to regulations affecting future applications for new licenses or certificates, whereas here the CAB regulation affected rights under existing certificates. That such a restrictive reading of the Storer doctrine is unwarranted, is shown by such decisions as National Broadcasting Co. v. United States, 319 U.S. 190, 63 S.Ct. 997, 87 L.Ed. 1344 (1943);
The present case is different in particular aspects of the facts or statutory provisions from Storer and the other Storer doctrine cases. However, the Storer doctrine is not to be revised or reshaped by reference to fortuitous circumstances. It rests on a fundamental awareness that rule making is a vital part of the administrative process, particularly adapted to and needful for sound evolution of policy in guiding the future development of industries subject to intensive administrative regulation in the public interest, and that such rule making is not to be shackled, in the absence of clear and specific Congressional requirement, by importation of formalities developed for the adjudicatory process and basically unsuited for policy rule making.
3. The need for and importance of policy rule making made on the basis of a procedure appropriate thereto is clearly identified in the Administrative Procedure Act (APA), 5 U.S.C. § 1001 et seq. In general, the APA establishes a dichotomy between rule-making and adjudication. For adjudication a formal system is provided.
Rule making, however, is governed by § 4, which essentially requires only publication of notice of the subject or issues involved, an opportunity for interested persons to participate through submission of written data, and the right of petition in respect of rules. These more limited requirements are geared to the purpose of the rule making proceeding, which is typically concerned with broad policy considerations rather than review of individual conduct. Compare the Attorney General's Manual on the Administrative Procedure Act (1947), pp. 14-15:
Rule making has a unique value and importance as an administrative technique for evolution of general policy, notwithstanding, or perhaps indeed because of, the freedom from the procedures carefully prescribed to assure fairness in individual adjudication. SEC v. Chenery Corp., 332 U.S. 194, 202, 203, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947).
The regulation under discussion, being an "agency statement of general * * * applicability and future effect designed to implement * * * or prescribe law or policy," plainly satisfies the definition of "rule" in § 2(c) of the APA,
4. Serious questions have been raised concerning the adjudicatory-type hearings required and held on initial licensing involving specific carriers and routes. It has been suggested that air line certificates are an instance where "functions that are more truly planning than adjudicatory have been forced too rigidly into the latter mould," and that officials engaged in planning functions should be "free to use flexible procedures in the search for ideas and policies" rather than be "bound either as a matter of routine or law to pursue procedures ill-adapted for the performance of such a function."
The difficulties currently experienced in the administrative process, sometimes referred to as its "malaise," obviously do not warrant departure from procedures mandated by Congress. But they suggest the need for relative certitude before a court concludes that adjudicatory procedures are required. The need for certitude is underscored if the adjudicatory procedure is to be required on the ground that the proceeding involves an amendment of licensing, for under the Administrative Procedure Act that conclusion results in even more rigorous
5. We are not here concerned with a proceeding that in form is couched as rule making, general in scope and prospective in operation, but in substance and effect is individual in impact and condemnatory in purpose. The proceeding before us is rule making both in form and effect. There is no individual action here masquerading as a general rule. We have no basis for supposing that the Board's regulation was based on a sham rather than a genuine classification. The classes of carriers were analyzed both functionally and in terms of capacity for furthering the promotional purposes of the Act. The class of combination carriers is not accorded the same rights as the class of all-cargo carriers, but the difference is in no sense a punishment for sins of commission or omission. They are not, in Judge Washington's phrase, "goats" being separated from favored sheep.
6. Petitioners' contention is not advanced by CAB v. Delta Airlines, 367 U.S. 316, 81 S.Ct. 1611, 6 L.Ed.2d 869 (1961). Once the Supreme Court made clear that the original certificate order had become final, it was undisputed that the second order, addressed to the one carrier (Delta) and prescribing for it a less favorable route than the original order, was an amendment of a certificate for which an adjudicatory hearing is requisite under § 401(g) of the Federal Aviation Act. The "security of route" principle thus gives protection to an individual carrier that has made an investment in order to carry on the certificated service, assuring it that the CAB will not worsen its position by action addressed against it individually, by prescribing inferior routes. Since the Supreme Court gave no indication in Delta that it intended to depart from the Storer doctrine, we see no basis for reading Delta as implying that the mere fact that licenses will be affected renders general rule making an impermissible means of agency action governing all carriers, or an appropriate general class of carriers.
Where the agency is considering an order against a particular carrier or carriers there is protection through the requirement of the adjudicatory procedure appropriate for such individual actions and amendments, a requirement which Delta warns will be strictly enforced. Where the agency is considering a general regulation, applicable to all carriers, or to all carriers within an appropriate class, then each carrier is protected by the fact that it cannot be disadvantaged except as the Board takes action against an entire class. For any such class regulation there is also protection outside the field of procedure in that the general regulation must be reasonable both as to the classification employed, and as to the nature and extent of the restriction in relation to the evil remedied or other general public purpose furthered.
7. There may be wisdom in providing for oral testimony, at least in legislative-type hearings, in advance of the adoption of controversial regulations governing competitive practices, even though the
This court has indicated its readiness to lay down procedural requirements deemed inherent in the very concept of fair hearing for certain classes of cases, even though no such requirements had been specified by Congress. Gonzalez v. Freeman, 118 U.S.App.D.C. 180, 334 F.2d 570 (1964); Pollack v. Simonson, 121 U.S.App.D.C. 362, 350 F.2d 740 (1965).
However in the present case the CAB did not limit itself to minimum procedures, but rather gave the parties a significantly greater opportunity to persuade and enlighten the Board. It provided not merely for written comment, but in addition for oral argument.
If additional procedural safeguards are to be imposed as a requirement it would be more salutary to incorporate them into a rule making procedure than to adopt a blanket requirement of an adjudicatory procedure. A rule making setting would better permit confinement of oral hearings to the kind of factual issues which can best be determined in the light of oral hearings, without undue elongation of the proceeding or sacrifice of the expedition and flexibility available in rule making. It would also permit the hearing examiner to confer with experts and the Board concerning "legislative facts" and policy questions.
However, there is no basis on the present record for concluding that additional procedures were requisite for fair hearing. We might view the case differently
The particular point most controverted by petitioners is the effect of the CAB regulation on their business. The issue involves what Professor Davis calls "legislative" rather than "adjudicative" facts.
It is part of the genius of the administrative process that its flexibility permits adoption of approaches subject to expeditious adjustment in the light of experience. Although the CAB's regulation is not temporary in the sense of being expressly limited in duration, the Board's findings plainly reflect its assumption that the regulation was intended to be subject to re-examination.
To avoid any possible misapprehension, our affirmance of the Board's action is without prejudice to the right of the combination carriers to reopen the question of their exclusion upon a showing that the Board's assumptions could not reasonably continue to be maintained in the light of actual experience, that their overall cargo business was significantly impaired, or that the air freight market had sufficiently expanded so that the promotion of the air cargo industry through blocked space reduced rates would not be imperiled by their participation.
Since our records show that this Court took action more than a year ago to permit the regulation to become effective (see note 3 supra), it should perhaps be mentioned that at the argument respondents
Meanwhile they have been accorded a hearing conforming to and surpassing the minimum required for rule making. They have not been subject to a denial of procedural rights that undermines the validity of the regulation.
WASHINGTON, Senior Circuit Judge, did not participate in this decision.
BURGER, Circuit Judge, with whom DANAHER and TAMM, Circuit Judges, join (dissenting):
Petitioners, three airlines authorized to carry both passengers and cargo on a regular basis, hold certificates for cargo carriage legally identical with the certificate held by Intervenor, Slick Corporation, an all-cargo carrier. Without holding the adjudicatory hearing required by statute before an outstanding certificate may be amended,
Acting under this "regulation" the Board issued the order under review, specifically denying applications of Petitioners to offer the same service Slick had been authorized to offer. These actions were taken in response to Slick's request, over the opposition of its fellow all-cargo carrier, Flying Tiger Line, that the Board "delineate the roles" of combination and all-cargo carriers
The certificates of the all-cargo carriers and those of the combination carriers bestow identical rights and impose identical obligations with respect to the carriage of property. It follows that the two types of carriers must be free to file identical tariffs for the carriage of cargo. By permitting the all-cargo carriers to file blocked-space tariffs the Board acknowledges their present authority to file such tariffs under their existing certificates, which, except as to passenger carriage, are the same as those of the combination carriers. By denying the combination carriers the opportunity to file such tariffs the Board in effect amends outstanding certificate authority. Cf. FCC v. National Broadcasting Co. (KOA), 319 U.S. 239, 63 S.Ct. 1035, 87 L.Ed. 1374 (1943).
The majority opinion cites a number of cases in an effort to sustain its holding that the Board has authority to amend Petitioners' certificates by rulemaking rather than an adjudicatory procedure. Those cases are not in point. First, most of them dealt with agencies other than the CAB. The Supreme Court said recently in another context, "[f]ederal agencies are not fungibles * * * — Congress has treated the matter with attention to the particular statutory scheme and agency." International Union, United Auto. Aerospace & Agriculture Implement Workers, etc. v. Scofield, 382 U.S. 205, 210, 86 S.Ct. 373, 377, 15 L.Ed.2d 272 (1965).
United States v. Storer Broadcasting Co., 351 U.S. 192, 76 S.Ct. 763, 100 L.Ed. 1081 (1956), upon which the majority chiefly relies, as well as FPC v. Texaco, 377 U.S. 33, 84 S.Ct. 1105, 12 L.Ed.2d 112 (1964),
Air Line Pilots Ass'n, Intern. v. Quesada, 276 F.2d 892 (2d Cir. 1960), is even less apposite. That case involved the narrow issue of validity of a rule based on flight safety considerations against pilots flying scheduled aircraft after reaching age 60; there was no amendment of certificate authority in the sense here involved. The licenses originally issued to the pilots specifically provided that their duration was as set out in current regulations. And the Act itself imposes an express duty on the Administrator of the FAA to prescribe reasonable regulations relating to pilot standards. It was thus in a very narrow and limited context that the court held that an adjudicatory hearing was not required for each individual pilot; the rule laid down there was made applicable to all pilots, not to certain ones selected by the Board.
Finally, the majority relies on Capitol Airways, Inc. v. CAB, 110 U.S.App.D.C. 262, 292 F.2d 755 (1961), which expressly distinguishes cases like the one before us and includes dictum directly on point here, while distinguishing CAB v. American Air Transport, Inc., 91 U.S.App.D.C. 318, 201 F.2d 189 (1952):
110 U.S.App.D.C. at 265, 292 F.2d at 758. (Footnote omitted.) The majority seeks to distinguish the import of this language and the American Air Transport case on the ground that here the Board does not accuse petitioners of violating the law. I confess great difficulty in understanding why licensees not accused of violating the law are not as much entitled to an adjudicatory hearing as licensees who are so accused, when the two are subjected to equivalent Board action. The majority's proposed distinction seems to me to pose substantial problems of equal protection of the laws under the fifth and fourteenth amendments.
Although it is not necessary to discuss the relative desirability of rulemaking and adjudicatory procedures in a situation where Congress has spoken as clearly as it has here, I note that my conclusion as to congressional meaning is reinforced by a consideration of the types of issues involved here. Rulemaking is normally directed toward the formulation of requirements having a general application to all members of a broadly identifiable class. As pointed out above, however, the CAB's result here is reached by a rule which has different impacts upon members of the same basic category. When the Board makes such a differentiation, the proceedings inescapably become highly adversary in character, especially where the final determination purports to rest upon asserted differences in capabilities and potentialities as
While the question whether reducedrate "blocked-space" service may be offered by any carrier might well be appropriate for rulemaking, the selection of particular carriers to provide such service is clearly the sort of question which can be resolved properly and fairly only in an adjudicatory proceeding. Once the Board had decided that it should not allow every freight carrier to offer such service, it was faced with the problem of picking and choosing among competing, mutually exclusive applications. Cf. Ashbacker Radio Corp. v. FCC, 326 U.S. 327, 66 S.Ct. 148, 90 L.Ed. 108 (1945). Furthermore, these were not applicants competing for a new right which neither had previously held; they were competing to retain a right which their certificates already authorized. The Board's action made some carriers "more equal" than others.
The majority seems to be trying to suggest, by repeated references to the combination carriers as a "class", that any multiple of one automatically makes a class for these purposes; two seems sufficient to make a "class" of the only domestic all-cargo carriers now certificated. The "formal" procedural safeguards which seem to distress the majority, see pp. 10-14, supra, were written into law by Congress precisely because Congress believed that they were necessary in making this crucial kind of determination. A general dissatisfaction with the "rigors" of procedural safeguards should not lead to dispensing with them in a case where they are most appropriate, nor to amending the statute judicially.
While it is not essential to my view of this case, it seems to me of no little significance that the history of all transportation, air, water or land, is that the carriage of bulk freight becomes the dominant and most lucrative business. I see no reason why this is not likely to be true in air carriage.
Circuit Judge Washington became Senior Circuit Judge on November 10, 1965.
In Order E-21160 the Board directed that the investigation into the lawfulness of the Slick tariff in Docket 15419 should proceed.
For some statements reviewing the relative advantages and disadvantages of rule making procedures as opposed to adjudication for the development of agency policy, and concluding that increased use of rule making is in the public interest, see e. g., Friendly, The Federal Administrative Agencies: The Need for Better Definition of Standards (1962); Shapiro, The Choice of Rule Making or Adjudication in the Development of Administrative Policy, 78 Harv.L.Rev. 921 (1965); Baker, Policy By Rule or Ad Hoc Approach — Which Should it Be? 22 Law & Contemp.Prob. 658 (1957).
Judge Friendly in effect suggests (p. 105) that the case-by-case technique as utilized by the CAB has muddied the waters and operated to avoid an overall policy statement of approach to the route structure.
A leading practitioner before the CAB has even suggested that the breakdown of the administrative process in protracted cases should be overcome by the adoption of a conference-hearing procedure, with virtual elimination of oral testimony, including cross-examination, and hearings confined in substance to conference discussions between lawyers and expert witnesses. Westwood, Administrative Proceedings: Techniques of Presiding, 50 A.B.A.J. 659 (1964).
Petitioner United stated in its comments that "if the Board accepts the conclusions of its staff predicated as they are on inaccurate and untested cost estimates, the combination carriers will be penalized and their right to operate all-cargo aircraft somehow impaired." Disputes as to costs frequently involve judgment as to cost allocations, and in such matters, as Justice Brandeis noted long ago, "experience teaches us that it is much easier to reject formulas presented as being misleading than to find one apparently adequate." Groesbeck v. Duluth, S.S. & A. R. Co., 250 U.S. 607, 614-615, 40 S.Ct. 38, 41, 63 L.Ed. 1167 (1919).
The Board's "Policy Statements," described in the majority's footnote 2, asserted the following justification for its action:
(Emphasis added.) In light of this statement, it should be remembered that the all-cargo airlines carry about 15 per cent of the nation's scheduled domestic air-freight, while the combination carriers carry 85 per cent. Of such freight transported in all-cargo airplanes, the all-cargo lines carry 36 per cent, and the combination lines 64 per cent.