Braniff Master Executive Council of the Air Line Pilotsassociation International, Petitioner, v. Civil Aeronautics Board, Respondent,eastern Air Lines, Inc., Intervenor, 693 F.2d 220 (D.C. Cir. 1983)

Following a practice the Interstate Commerce Commission developed in railroad consolidation cases,¹  the Civil Aeronautics Board (CAB or Board) historically has conditioned approval of airline route transfers and mergers upon carrier acceptance of terms mitigating hardship to employees. See United-Capital Merger Case, 33 C.A.B. 301, 323 (1961); North Atlantic Route Transfer Case, 14 C.A.B. 910, 916-19 (1951); United Western, Acquisition of Air Carrier Property, 11 C.A.B. 701, 707-08 (1950), aff'd sub nom. Western Air Lines v. CAB, 194 F.2d 211 (9th Cir. 1952). Such terms, known as labor protective provisions (LPPs), may include displacement compensation, integration of seniority lists, and mandatory arbitration of disputes. See Delta-Northeast Merger Case, 59 C.A.B. 608, 640-45 (1972); Allegheny-Mohawk Merger Case, 59 C.A.B. 22, 31-40 (1972); United-Capital Merger Case, 33 C.A.B. 307, 342-47 (1961).²  The Board's objective in imposing LPPs has been to ward off labor strife that could impede or delay a route transfer or merger, or detrimentally affect a carrier's stability or efficiency. Kent v. CAB, 204 F.2d 263, 265 (2d Cir.), cert. denied, 346 U.S. 826, 74 S. Ct. 46, 98 L. Ed. 351 (1953); Western Air Lines v. CAB, 194 F.2d 211, 214 (9th Cir. 1952).

This case concerns the Board's handling of LPPs in an urgent setting. In April 1982, when Braniff Airways, Inc. (Braniff) was still afloat but in dire financial straits, the CAB, meeting in an emergency session, granted interim approval for the transfer of most of Braniff's South American routes to Eastern Air Lines, Inc. (Eastern). The Board set a fifteen-month period as the duration of the temporary authority. It decided not to impose LPPs at that time, but said it would consider the issue in the hearing on long-term authorization and might then impose LPPs retroactively. Eastern Air Lines Application, Order 82-4-144 at 4 n. 4 (April 27, 1982), Joint Appendix (J.A.) 150.

Braniff Master Executive Council (BMEC), an organization representing former Braniff pilots,³  has petitioned this court to set aside the Board's interim order approving the Eastern/Braniff agreement for a fifteen-month period, to the extent that the order fails to include LPPs. In light of the unprecedented circumstances in which the Board acted, we hold that initial deferral of the LPP issue was reasonable. We further hold, however, that the Board impermissibly prolonged the deferral period and must now expedite resolution of this matter.

BACKGROUND

Beginning in March 1982, financially-distressed Braniff sought to sell its South American route network in an effort to gain needed funds that might enable it to survive as a domestic air carrier.⁴  On March 17, 1982, Braniff agreed to lease its South American routes, ground equipment, and facilities to Pan American World Airways, Inc. (Pan Am) for four years at a price of $30 million. That same day, the two airlines submitted their agreement to the CAB for approval, pursuant to section 412 of the Federal Aviation Act, a section generally applicable to air carrier agreements.⁵  On April 2, 1982, Braniff and Pan Am asked the CAB not to condition approval of the agreement on the inclusion of LPPs; they represented that "if Braniff had to bear the burden of payment, the benefits of the Agreement [to Braniff] would evaporate," and the arrangement negotiated would cease to make "economic sense for Pan Am if [that carrier] were saddled with LPPs." J.A. 214. Pan Am did agree, however, to take on all of Braniff's South American-based ground personnel.

Just over a month after the submission, the CAB denied interim approval of the Pan Am/Braniff agreement. The Board determined that transfer of Braniff's routes to Pan Am "would reduce actual competition in certain South American markets and would essentially leave Pan Am as the sole U.S.-flag carrier in South America, thus reversing the United States' policy for 30 years of assuring that at least two U.S. carriers maintain a substantial presence in South America." Braniff-Pan American Route Transfer Case, Order 82-4-113 at 4 (April 20, 1982), J.A. 264. The Board noted it had considered the agreement under section 408 as well as 412 of the Federal Aviation Act; section 408 applies to mergers, consolidations or purchases of substantial portions of a carrier.⁶  The Board further announced it was prepared to consider expeditiously alternative agreements for the disposition of Braniff's South American network. Id. at 4-5, J.A. 264-65.

The CAB's rejection of the Pan Am/Braniff submission set off a flurry of activity. Braniff faced a forecasted negative cash situation in South America as early as April 27, 1982. Cessation of service on Braniff's South American routes was an attendant prospect. The threat of a break in U.S.-flag service to certain South American countries prompted President Reagan, on April 23, 1982, to write to CAB Chairman McKinnon, urging that the Board "immediately take all necessary steps ... to ensure that U.S. carrier service continues without interruption on all Central and South American routes served by Braniff." J.A. 275. Meanwhile, Braniff sought to attract another carrier to an arrangement that would assure unbroken operation of the South American network.

On April 26, 1982, one day before Braniff had threatened to stop its South American flights, Braniff and Eastern submitted an agreement to the CAB patterned on the Pan Am/Braniff submission. Under this agreement, Braniff would lease its South American routes, ground equipment, and facilities to Eastern for six years at a price of $30 million. Upon the CAB's interim approval of the agreement, Eastern would immediately pay $11 million; a portion of this sum would be used to keep Braniff operating in South America until June 1, 1982, when Eastern would take over.⁷  Eastern, like Pan Am in its earlier route-acquisition bid, rejected LPPs for Braniff's U.S.-based personnel, including pilots, but it did agree to hire all of Braniff's South American-based personnel, including flight attendants.⁸ 

Believing it confronted an emergency, the CAB convened to consider the Eastern/Braniff submission on the night of April 26 in a closed meeting. The meeting yielded interim approval of the agreement for a fifteen-month period. The next day, the Board issued an order granting the interim approval, citing Eastern's ability to take over the network without lessening competition. Eastern Air Lines Application, Order 82-4-144 at 3 (April 27, 1982), J.A. 149. The Board announced it was acting under section 412 of the Federal Aviation Act, but the similarity between the Pan Am/Braniff and Eastern/Braniff submissions suggests the Board's awareness that section 408 was applicable to the transaction. At oral argument, counsel for the CAB stated that the Board proceeded under section 408 as well as section 412.⁹  The section 408 involvement is significant because Congress has instructed the Board to act on transactions under section 412 within twelve months, those under 408, within six months. 49 U.S.C. § 1490 (set out infra note 24).

The Board acknowledged the fifteen-month duration of the interim authorization was "longer than is usually provided for pendente lite exemptions." Order 82-4-144 at 4, J.A. 150. The CAB justified this unusual authorization as "essential to avoid an interruption of service to South America, to promote the United States' foreign aviation policy objectives in this region, and to preserve the Board's decisional flexibility in proceedings on long-term replacement authority." Id. Triggering the instant controversy, the Board decided not to impose LPPs at the outset, but to take up this issue later as part of a full hearing on permanent approval of the Eastern/Braniff agreement, with retroactive imposition of LPPs an eventual possibility. Order 82-4-144 at 4 n. 4, J.A. 150.

Three unions representing Braniff workers, including the Air Line Pilots Association, parent organization of BMEC, petitioned for reconsideration of the Board's April 27 order to the extent that it deferred the LPP issue.¹⁰  In a September 22, 1982, order outlining procedures for determining whether the Eastern/Braniff agreement should achieve permanent approval,¹¹  the Board recognized, explicitly, that sections 408 and 412 of the Federal Aviation Act were both applicable. However, the CAB stated its time schedule would accord with the one-year limitation applicable to section 412 proceedings, rather than the six-month limitation governing section 408 transactions. See Braniff South American Route Transfer Case, Order 82-9-81 at 14 n. 22 (September 22, 1982). The Board also affirmed in the September 22 order its initial decision to defer consideration of LPPs. Id. at 15-17. This postponement, first announced in the Board's April 27 order and later affirmed in the CAB's September 22 order, is the core administrative determination challenged in BMEC's petition for review.

DECISION

In addition to maintaining that the Board was required to impose LPPs from the outset, BMEC points to procedural infirmities in the CAB's interim approval of the Eastern/Braniff transaction. BMEC contends (1) closing the April 26, 1982, meeting violated the Government in the Sunshine Act, 5 U.S.C. § 552b; (2) the Board indulged in impermissible ex parte contacts with Eastern and Braniff; and (3) the deferral of decision regarding permanent authorization violated time constraints Congress imposed on Board action. 49 U.S.C. § 1490.

This court has already condemned the CAB's total closure of meetings such as the one the Board held on April 26, 1982. Pan American World Airways, Inc. v. CAB (Pan Am), 684 F.2d 31, 35-37 (D.C. Cir. 1982). We need not repeat the stern admonition contained in that opinion. However, like the panel in Pan Am, we do not believe the agency decision here on review, if it constituted a reasonable response to an urgent situation, should be overturned because of the Sunshine Act violation. As the Pan Am panel observed, "release of transcripts, not invalidation of the agency's substantive action," is the remedy generally appropriate for disregard of the Sunshine Act.¹² 

Similarly, the ex parte contacts, impelled by Braniff's failing circumstances, did not so infect the Board's decision to defer consideration of LPPs as to warrant nullification of that decision. CAB officials reported at the April 26 closed meeting they had been in contact, over the weekend, with officials from Air Florida, Eastern, Western Air Lines, American Airlines, Pan Am, and Braniff, "just asking all of them as possible interested parties to keep [the Board] ... apprised of what was going on." J.A. 47-48. Chairman McKinnon also talked to Frank Borman, Eastern's top executive, and a Braniff official to get details of the forthcoming Eastern/Braniff agreement. J.A. 101-02. All of these contacts took place before Eastern submitted its formal agreement with Braniff to the Board. Given the emergency situation, we cannot fault the CAB for endeavoring rapidly to collect information needed for intelligent, albeit urgent, decisionmaking.

Further, the record indicates that Eastern's opposition to the imposition of LPPs, which was just as vehement as Pan Am's, appeared with clarity in its written submission to the Board. The ex parte contacts therefore did not give the Board any otherwise unstated information about the carriers' position on LPPs.¹³  Since the contacts with Eastern officials, to the extent that they related to LPPs, did nothing more than reiterate what was evident on the face of the Eastern/Braniff agreement, the communications cannot be regarded as bearing significantly on the CAB's decision to defer the LPP issue. See generally Sierra Club v. Costle, 657 F.2d 298, 403 (D.C. Cir. 1981) (relative significance of an ex parte communication to the eventual agency action is a factor in determining whether disclosure of the communication is required). In sum, neither the closed meeting, nor the ex parte contacts warrant upsetting the Board's decision against immediate imposition of LPPs.

We therefore turn to the two issues critical to our decision. First, did the Board act reasonably in deferring the LPP question, and second, did the Board defer too long?

1. Immediate imposition of LPPs was not required by law or the CAB's past practice.

BMEC argues that in route transfer and merger cases the CAB is bound by its historic practice to impose LPPs uniformly and at once. Further, BMEC contends, Congress implicitly endorsed mandatory inclusion of LPPs when it passed the Airline Deregulation Act of 1978. We find these arguments insubstantial.

No statute has ever required imposition of LPPs in air carrier mergers or route transfers. Air Line Pilots Association v. CAB, 494 F.2d 1118, 1129 (D.C. Cir. 1974) (Board's power to impose LPPs is discretionary). Rather, Congress has broadly directed the CAB to rule on such transactions in a manner "consistent with the public interest." Federal Aviation Act, Sec. 408(b), 42 U.S.C. § 1378(b); see also id., Sec. 412(a) (2) (A), 49 U.S.C. § 1382(a) (2) (A) (CAB must disapprove an agreement if it is "adverse to the public interest"). In the Airline Deregulation Act of 1978, Congress clarified that "the need to encourage fair wages and equitable working conditions"¹⁴  ranks among several factors relevant to the public interest. Congress instructed the Board to consider that need. A general instruction to consider wages and working conditions simply cannot be read as a command to the agency to impose LPPs routinely. Indeed, Congress spoke with precision in the Deregulation Act when it wanted the Board to take particular measures to aid airline employees. Most notably, section 43 of the Act establishes a comprehensive employee protection program to assist workers whose employment terminated as a direct result of airline deregulation.¹⁵  Congress also limited recourse to mutual aid pacts, which airlines had used to tide a carrier over a strike.¹⁶  In short, faced with specific statutory provisions responsive to labor interests, a court cannot force an agency to infer other, specific, labor protective commands from broad congressional language that suggests discretion more than direction.¹⁷ 

The Board acknowledges that historically it has imposed LPPs routinely in merger cases, Brief for Respondent at 22, but insists it has made clear that the overriding consideration is the "public interest," a standard that may require adjustment to changing conditions. See Slick Airways, Suspension of Service, 26 C.A.B. 779, 782 (1958) (labor protection is "only one element to be weighed against the numerous considerations that enter into a determination of the overall public interest"). The CAB points out that in the merger cases cited by BMEC, in which LPPs were imposed though one of the carriers was failing, the parties had agreed to the imposition. See Delta-Northeast Merger Case, 59 C.A.B. 608, 634 (1972); United-Capital Merger Case, 33 C.A.B. 307, 323 (1961). Never before, the CAB asserts, has it encountered a case such as this one, requiring rapid action in an attempt to rescue a failing carrier, in which the parties to the merger or transfer strongly oppose LPPs. Past practice, the Board maintains, cannot control this "first time" situation.

Eastern, like Pan Am before it, vigorously objected to LPPs for Braniff's U.S.-based personnel, including pilots;¹⁸  a clause in the Eastern/Braniff agreement allowed Eastern to terminate the agreement without notice if the Board imposed LPPs.¹⁹  There was a pressing need to insure continued U.S.-flag service to South America, and Eastern's was the only viable application for the route network which did not threaten to reduce competition.²⁰  The CAB concluded it could not risk the possibility that Eastern would exercise the termination clause. Given these circumstances, we are unable to declare unreasonable the Board's decision not to impose LPPs before approving an interim arrangement.

The Board emphasizes a further relevant consideration. It had put all parties on notice after the passage of the Airline Deregulation Act not to rely on past practice: "LPP's will no longer be imposed as a matter of course, or because tradition dictates their use. We therefore advise labor to negotiate its own protections through the collective bargaining process at the first opportunity." Texas International-Pan American-National Acquisition, Order 79-12-163/164/165 at 67 (October 24, 1979). The warning to labor to resort to the bargaining table and not to rely on the agency was inescapable.²¹ 

Finally, we underscore that our ruling, like the Board's is tentative. Interested labor parties, including BMEC, will soon have an opportunity to be heard on whether LPPs should be imposed at this juncture. The Board has represented that, in the hearing about to occur, it will entertain argument for retroactive imposition of LPPs. Order 82-4-144 at 4 n. 4, J.A. 150. The CAB's ultimate decision on the appropriateness of LPPs for Braniff's former U.S.-based personnel will be subject to court review.

2. The CAB impermissibly prolonged the deferral period.

As the CAB acknowledged, the fifteen-month interim award to Eastern is "longer than is usually provided for pendente lite exemptions," Order 82-4-144 at 4, J.A. 150. At oral argument, the CAB's counsel broke down the fifteen-month period as follows: twelve months for CAB action, two months for subsequent presidential review,²²  and some "leeway" (presumably one month) to allow for negotiations with South American governments to provide a smooth transition, if Eastern's application eventually is disapproved.²³  CAB counsel also represented that the purpose of the lengthy interim award was to afford Eastern an opportunity to recoup its $11 million initial payment to Braniff.

Section 1010 of the Federal Aviation Act²⁴  provides that the CAB shall issue a final order within twelve months of the submission of a section 412 application and within six months of the submission of a section 408 application. Section 1010 was adopted as part of the Airline Deregulation Act of 1978; throughout the long gestation period of this law, CAB officials consistently opposed the setting of statutory time limits and urged that Congress leave the matter to the CAB, to insure administrative flexibility.²⁵  The CAB's pleas for flexible time limits were not effective. Congress passed section 1010, which sets fixed periods.

In its September 22, 1982, order, the CAB determined:

Since these agreements were submitted for approval under section 412 of the Act, we interpret section 1010 as allowing one year from the end of April 1982, for final Board decision. Although Sec. 408 is also in issue, we perceive no legal or compelling policy reasons to adhere to the Sec. 408 timetable.

Braniff South American Route Transfer Case, Order 82-9-81 at 14 n. 22 (September 22, 1982). The Board's position, supported by its order in Air Florida System, Inc. (LACSA), Order 82-1-108 at 2 n. 3 (January 25, 1982), is that whenever both sections 408 and 412 are in issue, it has discretion to choose either the twelve-month timetable applicable to section 412 transactions or the six-month timetable specified for section 408 transactions. In LACSA, the Board announced it intended to follow the earlier deadline.²⁶  In this case, however, because of the complexity involved in reviewing an entire route network, the Board opted for the longer period. Brief for Respondent at 32-33.

The Board's argument for the twelve-month period, based on the complexity of this case, is unavailing since Congress did not tie the limitation periods to that factor, although such an approach might have made good sense. The legislative history, while it is sparse, indicates that the six-month deadline was set without regard to complexity, but with a particular view to facilitating stability in the financial markets by lessening the period of uncertainty faced by the parties to the merger.²⁷  One might read the legislative history to suggest that only the principal parties to the merger, in this case, Eastern and Braniff, can invoke the section 1010 time limitations. Neither Eastern nor Braniff has raised objections to the CAB's decision to follow the one-year time schedule, and under this narrow reading of the legislative design for section 1010, BMEC would not be positioned to complain about the Board's scheduling.

We believe such a narrow interpretation is inappropriate. Congress sought to expedite merger approvals to lessen interim uncertainty. BMEC, along with competitors for the Braniff network, face an uncertain situation, as do Eastern and Braniff, as long as the section 408 application is pending. For example, delay in deciding on LPPs may cost BMEC pilots valuable flying time, perhaps as significant to them as their monetary loss. We therefore conclude that BMEC, as a party affected by the merger, can invoke the relevant section 1010 time limit, but only to the extent of BMEC's interest in the transaction. More precisely, BMEC can invoke the time limit only as it bears on the Board's decision whether to impose LPPs.

Had it adhered to the section 1010 limitation, the CAB would have authorized only a six-month time schedule for decision. Since BMEC has invoked the relevant deadline, the Board should have scheduled its proceedings so as to arrive at its final disposition of the LPP matter in the context of the Eastern/Braniff agreement before the end of October 1982.

The statutory time limitations are new and have not had a judicial airing in any prior case. Moreover, were we to order the Board to decide the LPP question forthwith, no full hearing or thoughtful consideration would be possible. We therefore remand the case to the CAB with instructions that, in view of BMEC's objection to deferred disposition, the Board may not further delay final decision on LPPs under the Eastern/Braniff agreement beyond ninety days from the date our mandate issues. See Northwest Airlines, Inc. v. CAB, 539 F.2d 748, 753 (D.C. Cir. 1976).

CONCLUSION

For the reasons stated, the order on review is affirmed in principal part and remanded for further proceedings consistent with this opinion.

It is so ordered.