[The exam in my American legal history course consists of two essays, one on the legal history of some regulatory regime my students did not study but which developed much like those they did. The other is a biographical essay on some Black, Jewish, and/or female lawyer who made for an interesting comparison with those we studied. Below is a slightly augmented version of the first essay from this year's exam. For earlier ones, start here. DRE.]
Although the world’s first powered flight took place in the United States on December 17, 1903, when Orville Wright flew 120 feet on a North Carolina barrier island, for many years the U.S. lagged behind other nations in promoting and regulating aviation. As an American treatise writer observed, while Americans still regarded aviation as “a very dangerous sport carried on by the more adventurous barnstormers of the day,” Europeans had taken it seriously as “a war weapon and a means of fast transportation knowing no national boundaries.” Their governments directly regulated air transportation and placed civilian and military aviation under a single, national Ministry of Aviation. In contrast, the United States did not even begin scheduled air mail service until 1918. Two more years passed before transcontinental air service arrived, with night flights guided by bonfires.Indeed, well into the 1920s, American jurists still had not cleared the most fundamental legal hurdle to commercial flight, the maxim Cuius est solum, eius est usque ad coelum et ad inferos (“Whoever owns the soil, owns to the heavens and to the depths”). If followed strictly, a commentator observed, the ad coelum maxim would “create a private property right in the airspace, placing absolute ownership to the heavens in the surface owner.” Aviators would not be able to negotiate with the countless surface owners whose airspace they crossed and would therefore face “continual litigation in trespass.” Conferring eminent domain power on airlines also was no solution, if only because weather commonly forced aviators to depart from their flight plans.
American lawyers set out to solve this law-made problem. Soon after World War I, a committee of the National Conference of Commissioners on Uniform State Laws started work on a model statute. Approved by the American Bar Association in 1922, it legalized flight over the land of others unless it occurred “at such low altitudes as to interfere with the then existing use to which the land . . . or the space above the land . . . is put by the owner.” In 1923, a Minnesota trial judge reached the same result without a statute. The ad coelum maxim, wrote Judge J. C. Michael, was “adopted in an age of primitive industrial development . . . when any practical use of the upper air was not considered or thought possible.” But now, thanks to “marvelous . . . mechanical inventions,” the “great public usefulness” of air travel was obvious to all. “Modern progress and great public interest should not be blocked by unnecessary legal refinements,” he declared. Courts had long adapted common-law rules to “new conditions arising out of modern progress”; now they should recognize that “the upper air is a natural heritage common to all of the people.”
A single federal agency charged with regulating all aspects of civilian aviation did not arrive until 1938. Until then, two different federal departments-and, briefly, an existing independent commission-imperfectly set aviation policy.
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| MacCracken, right, observes his successor's swearing-in (LC) |
Starting in 1922, Secretary Herbert Hoover lobbied for the creation of a bureau within the Department of Commerce to regulate civilian aviation. Congress finally obliged with the Air Commerce Act of 1926, which empowered the Secretary of Commerce to a register and inspect aircraft, examine and rate pilots, certify airports, and promulgate safety regulations. It also created an “Aeronautics Branch” within the Commerce Department, headed by an Assistant Secretary of Commerce for Aeronautics, nominated by the President and confirmed by the Senate. The first holder of that office was William MacCracken, a 1911 graduate of the University of Chicago Law School, who had served as a flight trainer during World War I, had chaired the American Bar Association’s Committee on the Law of Aeronautics since its creation in 1920, and helped draft the Air Commerce Act after studying European air ministries. “The great deal of discretion” the statute vested in the Commerce Department, MacCracken said, was necessary if its regulations were to “keep pace with the development of this new art.” Although some aviation lawyers, hoping to end competition from small “fly by night” air carriers, argued that the Air Commerce Act gave Hoover the power to establish price-and-entry regulation for the industry by issuing a limited number of “certificates of convenience and necessity” to air carriers for particular routes and setting the prices they could charge passengers, MacCracken could never persuade Hoover to take that step, probably because Hoover wanted the industry to organize itself through its own associations.
That left the job of imposing order on the market for air travel to the Post Office Department. Starting with the Air Mail Act of 1925, the United States heavily subsidized the airline industry with intentionally generous air mail contracts. In 1929, for example, the federal government paid airline over $9 million more to carry air mail than it received in postage on it. With passenger service rudimentary into the 1930s, those subsidies were needed to keep commercial aviation aloft.
With the first round of four-year contracts, awarded to legions of short-distance carriers, expiring in
1929, now-President Herbert Hoover’s new Postmaster General Walter Brown, a dominant figure in the Republican Party of Ohio, decided to award air mail contracts to a handful of financially secure carriers capable of flying an entire transcontinental route rather than rely on a patched-together network of financially precarious companies. (“A bankrupt is a poor person to do business with,” he explained.) William MacCracken, who had resigned as Assistant Secretary of Commerce for Aeronautics to open an aviation-focused practice in Washington, DC, was one of several lawyers for the air carriers most likely to win transcontinental contracts, backed Brown and drafted the McNary-Watres Act, passed, in April 1930, to enable Brown to implement his plan.
Another lawyer was a woman. Since 1921, Mabel Walker Willebrandt (1889-1963) had been an Assistant Attorney General in the U.S. Department of Justice, tasked with overseeing federal prisons and enforcing Prohibition, since 1921. She had campaigned for Herbert Hoover in 1928 and expected a better job in his administration. When none arrived, she accepted the offer of a retainer by a recently created holding company, Aviation Corporation (AVCO), assembled from scores of small carriers by two great New York investment banks. AVCO wanted someone to help get their interests written into what became the McNary-Watres Act and to ensure that the Postmaster General designate its air fields as regular stops for air mail planes. A Washington lawyer told AVCO that not only could Willebrandt handle the legal phases of the operation; she also had “the necessary contacts,” including her good friend Postmaster General Brown! Willebrandt got the job and, some years later, would go on to chair the ABA Committee on Aeronautical Law.
Invoking his broad new powers to award ten-year contracts, Brown convened airline lawyers and executives in what his critics later called “the Spoils Conference.” After outlining the system he wanted, Brown left the representatives of the air carriers to bargain amongst themselves. Unsurprisingly, the lawyers failed to agree–much shouting ensued–and Brown ended up imposing a plan suggested by McCracken, under which four carriers, including his client (later known as TWA) and AVCO (later known as American Airlines), got transcontinental contracts. Payments to air mail carriers reached $19.5 million in 1933.
MacCracken
spoke out in September 1933 when economy measures by Franklin D.
Roosevelt’s new Secretary of Commerce left the nation’s air navigation
system in a dangerous condition. The lives and property of those who
fly had become “a plaything of politics,” he charged. But MacCracken’s
own time in the barrel was fast approaching. In the fall of 1933, Hugo
Black, then U.S. Senator from Alabama, opened an investigation of the
Spoils Conference. “It was at this stage that the money changers saw
their golden opportunity,” Black declared. “The control of aviation had
been ruthlessly taken away from men who could fly and bestowed upon
bankers, brokers, promoters and politicians, sitting in their inner
offices, allotting themselves the taxpayers’ monies.” Black’s committee
subpoenaed MacCracken and his office files, from which a client then
removed documents. McCracken refused to testify, claiming
attorney-client privilege, was held in contempt of Congress, and, after
battling the conviction up to the U.S. Supreme Court, served his brief
sentence in the Willard Hotel, ostensibly because the Senate’s
Sergeant-at-Arms had nowhere else to confine him.
By early 1934, a
historian has written, “allegations of conspiracy, corruption, and
favoritism [appeared] in massive headlines in newspapers across the
country.” FDR’s Postmaster General James Farley canceled all air mail
contracts as the product of corrupt bargaining and gave the Army Air
Corps the job of transporting air mail. The results were disastrous: in
less than a month, sixty-six forced landings left twelve army pilots
dead.
Congress acted at once. The Black-McKellar Act, passed in
June 1934, divided national aviation policy still further. Under a new
name (the Bureau of Air Commerce), the Aeronautics Branch carried on
its old duties at the Department of Commerce. The Post Office
Department continued selecting the carriers of air mail, awarding them, a
critic charged, solely on the requirements of air mail service,
heedless of the need to rationalize passenger service. But the Act gave
the job of setting rates for carrying air mail to the Interstate
Commerce Commission, with its long history of apolitical rate-setting
for railroads. (Rates for carrying passengers continued to be
unregulated by any government body.) Aviation industry figures
complained that the ICC was too protective of railroads to do the job
right.
FDR appointed a committee to study alternatives, but
Postmaster General Farley and Commerce Secretary Dan Roper fought all
attempts to transfer their jurisdiction elsewhere until 1938, when
Congress finally passed the Civil Aeronautics Act (CAA). It created, in
addition to the precursors of today’s National Transportation Safety
Board and Federal Aviation Administration, a body soon renamed the Civil
Aeronautics Board (CAB). It finally gave the biggest air carriers what
they had long sought: a regulatory body that would protect their routes
and revenues from what they considered “ruinous competition,” by
issuing certificates of public necessity and convenience for particular
routes and fixing the prices carriers could charge for carrying
passengers and mail. Under the CAA’s “grandfather clause,” eighteen
airlines automatically received permanent certificates for their
existing routes. To get new routes, they or new air carriers had to
show that they were “fit, willing, and able” to operate flights reliably
and that “the public convenience and necessity” required that the
routes be flown. All fares had to be “just and reasonable,” determined
with reference to five specified and open-ended factors and such other,
unspecified factors as the CAB thought appropriate. The CAA also
provided that the “findings of facts by the [CAB], if supported by
substantial evidence, shall be conclusive” in any judicial challenge to
its orders.
In October 1938, Edgar Gorrell, a spokesman for the
grandfathered airlines, acknowledged that “the tendency to make the same
agency both prosecutor and judge quite properly evokes protest,” but he
argued that to “transfer to the courts the judicial functions now
vested in administrative bodies” would be disastrous. Yes, a court
could overturn the order of the CAB “only if there is no possible
justification for the administrative action,” even if the court would
have decided otherwise had it been its decision to make. But Gorrell
was unconcerned. He expected the CAB to “exercise self-restraint in
passing upon the propriety of the conduct of management.” Of course, if
the CAB ever attempted to “do the work of industry,” the air carriers
would ask the courts to defend their prerogatives.
Our best view
of the CAB’s procedures is a monograph prepared by a recent law graduate
on the Walter Gellhorn-directed research staff of the Attorney
General’s Committee on Administrative Procedure (AGCAP). Its author
observed that the CAB attempted “to determine broad economic questions
through a procedure closely resembling the course of a lawsuit between
individual.” In fact, the resemblance was imperfect. When the CAB set
a hearing on, say, whether to issue a certificate of convenience and
necessity, it notified not only the applicant but also all the nation’s
air carriers and to transport associations, as well as any affected
state or municipality. Any interested party could become an
“intervenor” and oppose the certificate and present evidence. The CAB
told its trial examiners to exclude only “plainly inadmissible”
evidence. Because the relevant standards were so broad, they rarely
excluded any. The applicant’s lawyer could cross examine any witness,
including the intervenors’, who testified under oath.
Once all
the testimony was in, the applicants and intervenors could make oral
arguments to the trial examiner and submit briefs before the trial
examiner wrote his “intermediate report.” When finished, the trial
examiner’s report was released to the public; any party might except to
its findings of fact and conclusions of law. Then these exceptions,
with the record and the trial examiner’s intermediate report, went, not
to the five-member CAB but to a “Consulting Committee,” consisting of a
lawyer in the CAB’s general counsel office with no previous connection
to the case, a trial examiner (who might or might not have presided at
the hearing); and a member of the CAB’s staff of accountants and
economist. Applicants and intervenors could not discuss the case with
the Consulting Committee, but the Consulting Committee could and did
consult the CAB lawyer who appeared at the hearing or the trial examiner
who presided, if he was not one of its members. The Consulting
Committee prepared a draft opinion, which might bear little resemblance
to the intermediate report, and order that it sent to the five-member
CAB. At its meeting, the CAB general counsel and the member of the
Consulting Committee who drafted the opinion were present, but not the
parties or intervenors. At last, the CAB granted or denied the
certificate and issued its opinion.
The author of the AGCAP
monograph claimed that CAB opinions addressed “the questions of law and
fact in much the same way as do the decisions of an appellate court.”
Others denied the resemblance. After resigning in protest, the former
CAB member Louis Hector complained that the agency’s decisions followed
no consistent principle. The CAB altered its policies “from case to
case,” he said, “with no advance notice, no opportunity for argument by
the parties on a proposed change in policy, and no opportunity for the
parties to present new evidence in the light of the new policies.” The Covington & Burling lawyer Howard Westwood agreed: CAB opinions were
“grubby, uninspired, and sometimes incoherent.”
Yet Gorrell’s
1938 predictions proved correct: as a rule, the CAB respected the
managerial prerogatives of the grandfather airlines and protected their
markets, and as a rule the courts let the CAB alone. The best chance to
interject some competition into the airline industry came in 1946, when
Harry Truman appointed James Landis chair of the CAB. Landis had been
Felix Frankfurter’s prized student and chaired the Securities and
Exchange Commission before becoming dean of the Harvard Law School in
1937. His tenure at CAB was a deep disappoint to him. On all important
matters he was outvoted by his fellow members: a former Republican
congressman, a former Democratic senator, MacCracken’s successor as
Assistant Secretary of Commerce for Aeronautics (who later became an
airline executive), and a former Assistant Postmaster General in charge
of air mail.
Perhaps the most galling moment for Landis
involved Truman himself. The CAA provided that the CAB’s issuance of
certificates of convenience and necessity for international flights or
flights between the United States and its possessions “shall be subject
to the approval of the President.” In 1946, the CAB certified a
Northwest Airlines route from Seattle to Honolulu, but because Hawaii
was still a territory, the matter went to the White House to be
finalized. Strange things then ensued. First, Truman denied Northwest a
certificate because, he somehow concluded, the route would not be
profitable. Not long thereafter, however, the president reversed
himself and approved Northwest’s certificate. This brought a protest
from Pan American and, a few weeks later, Truman’s decision to certify
both Northwest and Pan Am. Thus, a historian wrote, “the White House
ordered certificates for both airlines on a route it originally rejected
as too thin to sustain even one line.” What Landis probably thought at
the time, he said out loud sometime after Truman declined to reappoint
him in December 1947: Under Truman, victory in overseas airline
decisions went to whomever “supplied the palace guard at the White House
with adequate quantities of Bourbon.”
Could one challenge such
presidential decisions in court? You might have thought so from the
CAA, which made “any order” of the CAB subject to external review. The
only express exception was for orders involving foreign air carriers,
which the CAA said courts could not review after the President had
approved or rejected them. Although the section did not expressly
except the international or territorial flights of American carriers,
when such a case reached the U.S. Supreme Court, Justice Robert H.
Jackson, writing for a 5-4 majority in 1948, ruled that the President’s
decision was not reviewable. In exercising his powers as
“Commander-in-Chief and as the Nation’s organ in foreign affairs,”
Jackson wrote in Chicago & Southern Air Lines v. Waterman Steamship Corp.,
the President had access to “intelligence services whose reports are
not and ought not to be published to the world. It would be intolerable
that courts, without the relevant information, should review and
perhaps nullify actions of the Executive taken on information properly
held secret.”
