author: TAMM, Circuit Judge:

text:
    HAWAIIAN AIRLINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent.
    No. 72-1662.
    United States Court of Appeals, District of Columbia Circuit.
    Argued May 31, 1974.
    Decided April 4, 1975.
    Ronald D. Eastman, Washington, D. C., with whom James M. Verner, Washington, D. C., was on the brief for petitioner.

      Glen M. Bendixsen, Associate Gen. Counsel, C.A.B., with whom Richard Lit-tell, Gen. Counsel, O. D. Ozment, Deputy Gen. Counsel, Rozann M. Skozen, Joan Marie Frankel, Attys., C.A.B., and Howard E. Shapiro, Atty., Dept, of Justice, were on the brief for respondent. R. Tenney Johnson, Gen. Counsel, C.A.B., at the time the record was filed and Robert L. Toomey, Atty., C.A.B., also entered appearances for respondent.
    Before BAZELON, Chief Judge, FAHY, Senior Circuit Judge, and TAMM, Circuit Judge.
   Opinion for the Court filed by Circuit Judge TAMM.

TAMM, Circuit Judge:

Petitioner, Hawaiian Airlines, Inc. (Hawaiian), seeks review of two orders of the Civil Aeronautics Board which, inter alia, awarded Hawaiian’s competitor, Aloha Airlines, Inc. (Aloha), a subsidy for the period September 16, 1968 through February 28, 1969, and denied Hawaiian’s petition for reconsideration of that order and a related order. Our review of the record elicits no error in the Board’s orders and therefore, we affirm.

On September 16, 1968, Aloha petitioned the Board for a subsidy award pursuant to section 406(b) of the Federal Aviation Act of 1958. Shortly thereafter, Hawaiian also petitioned for a subsidy determination, seeking a class rate which would yield zero subsidy for both carriers. The petitions were consolidated for hearing, and on June 22, 1970, Administrative Law Judge (ALJ), then Examiner, Milton H. Shapiro issued his Initial Decision, App. at 75-175, which was subsequently adopted with slight modification by the Board. CAB Order No. 72-5-62 (May 16, 1972), App. at 24-51. The Board specifically agreed “with the examiner’s conclusion that Hawaiian is entitled to no subsidy for either the past or future periods, . . . that Aloha should be awarded subsidy for the 5V2 month period September 16, 1968 through February 28, 1969, and that Aloha should be awarded no subsidy for the remainder of the past period or for the future period.” Id. at 3, App. at 27. However, the Board did modify the specific amount of subsidy awarded Aloha, finding “that certain adjustments which the examiner declined to make to Aloha’s operating results should have been made, and that certain technical errors in the examiner’s computations should be corrected.” Id. The cornerstone of the ALJ’s decision and the Board’s order was the finding that, except for the 5V2 month period for which Aloha was awarded a subsidy, both carriers engaged in a “scheduling war”, resulting in their failure to attain reasonable load factors and thus warranting denial of subsidy under the “honest, economical, and efficient management” standard of section 406(b). Regarding the 5V2 month period, the Board concluded that “the examiner found that Aloha’s low load factor was the sole result of Hawaiian’s scheduling practices . [and] thus beyond its control, and it cannot be found that Aloha’s scheduling was the product of other than honest, economical and efficient management.” Id. at 10-11, App. at 34-35 (emphasis added, footnote omitted).

On February 7, 1973, the Board denied Aloha’s petition for reconsideration of Order No. 72-5-62 and Hawaiian’s motions to confine certain findings in Order No. 72-5-62 to the period ending September 30, 1970, and to reopen the record to take further evidence on the issue of the amount of subsidy required for Hawaiian. CAB Order No. 73-2-29 (February 7, 1973), App. at 52-71. At this point the Board noted that Aloha had filed an antitrust suit against Hawaiian on July 3, 1972, which alleged that beginning as early as 1968, Hawaiian attempted to monopolize the inter-island air transportation system in violation of section 2 of the Sherman Act, 15 U.S.C. § 2 (1970), and sought treble damages of $23,100,000 under section 4 of the Clayton Act, 15 U.S.C. § 15 (1970). Id. at 10, App. at 61; see Aloha Airlines, Inc. v. Hawaiian Airlines, Inc., 349 F.Supp. 1064 (D.Hawaii 1972) (denying Hawaiian’s Rule 12(c) motion to dismiss, Rule 56 motion for summary judgment and Rule 12(f) motion to strike), aff’d on interlocutory appeal, 489 F.2d 203 (9th Cir. 1973). The Board concluded that “any injury suffered by Aloha during [the 5V2 month] period increased its subsidy need” and, if that need were “subsequently satisfied in whole or in part by Hawaiian, Aloha’s recognizable need is diminished and its subsidy must be reduced.” CAB Order No. 73-2-29 at 10, App. at 61. Consequently, the Board amended Order 72-5-62 to provide for the reduction of Aloha’s subsidy award by whatever recovery Aloha received from Hawaiian in the antitrust case. However, “out of an abundance of caution,” the Board noted “that nothing herein or in Order 72-5-62 should be considered as an expression of the Board’s view concerning the merits of Aloha's complaint.” ’ Id. at 10-11, n. 15, App. at 61 — 62, n. 15.

On May 4, 1973, Hawaiian petitioned the Board for reconsideration of Orders 72-5-62 and 73 — 2 — 29 in light of an April 2, 1973 ruling of the district court in Hawaii that the Board’s following findings of fact be deemed conclusively adjudicated for purposes of the antitrust proceeding:

A. During the years 1968 and 1969, Hawaiian could reasonably have attained a load factor of 57.7 percent under honest, economical and efficient management and in the absence of excessive competitive scheduling.
B. During the years 1968 and 1969, Aloha could reasonably have attained a load factor of 55.1 percent under honest, economical and efficient management and in the absence of excessive competitive scheduling.
° C. During the period September 18, 1968, through February 28, 1969 Aloha’s low load factor was the result solely of Hawaiian’s scheduling practices. During this period, Aloha made reasonable attempts to adjust its capacity downward, but in the face of a continued expansion of schedules by Hawaiian was unable to stem the decline in its own load factor.

CAB Order No. 73 — 6 — 109 at 1 — 2 (June 28, 1973), App. at 72 — 73. Concerned that the Board’s findings, unless clarified, might have adverse collateral consequences in the antitrust suit, Hawaiian requested the Board to clarify the “intent” of its findings vis-a-vis the issue of excessive or unlawful competition and to explain that, because of the judgmental nature of load factor determinations, they should not be regarded as precise. Hawaiian also objected to the Board’s characterization of the ALJ’s finding that Aloha’s low load factor during the 5V2 month period was the sole result of Hawaiian’s scheduling practices. Id. at 2, App. at 73. In Order 73 — 6 — 109, the Board denied Hawaiian’s petition for reconsideration, resting on its two prior opinions and the ALJ’s Initial Decision. Id. at 2 — 3, App. at 73 — 74.

On petition for review to this court, Hawaiian raises several objections to the Board’s orders. Hawaiian challenges the Board’s finding that its scheduling practices were the sole cause of Aloha’s low load factor as inconsistent with other portions of Order 72 — 5 — 62 and not supported by substantial record evidence. After submission of the case, we too were concerned with this point, especially in view of what appeared to be contradictory evidence in the ALJ’s Initial Decision. See Aloha Airlines, Inc. and Hawaiian Airlines, Inc., CAB Docket No. 20244 et al. at 15, 17 — 19, 26 (Initial Decision, June 22, 1970), App. at 94, 96-98, 105. Thus we remanded the record to the Board for supplementation to clarify the ambiguity surrounding the “sole cause” finding. Hawaiian Airlines, Inc. v. C. A. B., No. 72-1662 (D.C.Cir. Order filed June 6, 1974).

On remand the Board considered the ambiguity and now agrees with Hawaiian that the ALJ did not find Hawaiian’s scheduling practices to be the “sole” cause for Aloha’s low load factor. However, the Board concluded that the ALJ did find that “Hawaiian’s scheduling practices were the ‘primary cause of both carriers’ declining load factors’ ” and that “[i]n any event, this was the intended purport of our findings in Order 72-5-62, and we again so find.” CAB Order No. 74-11-86 at 3-4 (November 19, 1974). As now modified we cannot say that the finding is either inconsistent with other portions of Order 72-5-62 or unsupported by substantial record evidence, so adequately set forth in the Initial Decision and subsequent Board orders that we need not reiterate it here.

Hawaiian also asserts that the Board erred in failing to establish a class rate covering both Hawaiian and Aloha, citing several cases where the Board implemented its general policy to avoid subsidizing one carrier at a higher rate than its similarly situated competitor. Petitioner’s Br. at 28 — 33. However, the Board’s general policy is just that and not an immutable rule to be applied regardless of circumstances. Having reasonably adopted the AU’s findings that both carriers engaged in a scheduling “war”, resulting in more flights than dictated by “honest, economical, and efficient management” and concomitantly, seat load factors lower than those which should have been reasonably attained, the Board was manifestly justified in disallowing any subsidy, including a class rate. As to the 5V2 month period, Aloha’s low load factor was not a result of its scheduling practices, but primarily Hawaiian’s, which the Board found not dictated by “honest, economical, and efficient management.” Regardless of the carriers’ homogeneous characteristics, application of the Board’s general class rate policy was plainly not mandated in the instant case, where this difference was established. We do not doubt the importance of class rates in the regulatory scheme, see Transcontinental & Western Air, Inc. v. C. A. B., 336 U.S. 601, 606-07, 69 S.Ct. 756, 93 L.Ed. 911 (1949), but concur that they are not applicable here.

The remaining issues argued by Hawaiian relate, directly or indirectly, to alleged ambiguities in the Board’s orders and the Board’s refusal to clarify them in light of the antitrust proceedings initiated by Aloha. Since the Board’s orders are in fact quite clear, we regard Hawaiian’s assertions to be ostensibly an expression of its concern that the Board’s findings will be interpreted as a finding of predatory intent under the antitrust laws. While we can understand Hawaiian’s concern, we are unable to discern a legitimate basis for it.

The “honest, economical, and efficient” standard of section 406(b) merely embodies, inter alia, “the Board’s basic policy to refuse to underwrite any increased need which results from the provision of additional capacity at the expense of a decline in load factor.” Trans-Pacific Airlines, Ltd., and Hawaiian Airlines, Ltd., Mail Rates, 20 CAB 668, 675 (1955) (footnote omitted). “[S]ince restraints that normally operate on corporate management may be subdued in the case of a subsidized operation,” the standard necessitates a policy of strict scrutiny of management decisions which affect subsidy awards. Trans World Airlines, Inc. v. C. A. B., 128 U.S.App.D.C. 126; 385 F.2d 648, 657 (1967), cert. denied, 390 U.S. 944, 88 S.Ct. 1029, 19 L.Ed.2d 1133 (1968). Hence, it follows that a failure to meet the subsidy award standard is not necessarily equivalent to the requisite proof of “predatory intent” in an antitrust case. Indeed, in discussing Hawaiian’s assertion in the antitrust case that the district court proceedings should be stayed pending the Board’s exercise of primary jurisdiction to resolve Aloha’s claim of unfair competition, the Ninth Circuit recognized this point, stating:

While there are questions of the application of the doctrine of collateral estoppel to be resolved by the trial court when it considers what effect is to be given to the determinations made by the CAB in the subsidy proceedings that there was uneconomical scheduling by [Hawaiian] causing the right to a subsidy by Aloha, the elements to be proved as to the existence of Sherman Act violations would under no circumstances be a matter for the Board to decide.

Aloha Airlines, Inc. v. Hawaiian Airlines, Inc., 489 F.2d 203, 211 (9th Cir. 1973) (emphasis added). Moreover, the court continued:

[The Board] was requested to, and it did, grant a subsidy for conduct occurring during a period five and one-half months midway between the start and the conclusion of the alleged antitrust conspiracy, based upon “uneconomical scheduling.” It is to be noted that this is all that it need find in order to grant subsidy. It was not requested to, and it did not, find the other ingredients present which would be required in the bringing of an antitrust action.

Id. (emphasis added). Whether the district court in Hawaii properly adopts the Board’s findings for use in the antitrust suit is ultimately a matter for the Ninth Circuit to resolve, and we discern no need or basis for this court to interject itself in that proceeding.

In short, we think that the Board unambiguously resolved the issues before it and that its orders are based on substantial record evidence.

Affirmed.

      . Section 406(b) of the Act, 49 U.S.C. § 1376(b) (1970), reads:
      (b) Rate-making elements
      In fixing and determining fair and reasonable rates of compensation under this section, the Board, considering the conditions peculiar to transportation by aircraft and to the particular air carrier or class of air carriers, may fix different rates for different air carriers or classes of air carriers, and different classes of service. In determining the rate in each case, the Board shall take into consideration, among other factors, (1) the condition that such air carriers may hold and operate under certificates authorizing the carriage of mail only by providing necessary and adequate facilities and service for the transportation of mail; (2) such standards respecting the character. and quality of service to be rendered by air carriers as may be prescribed by or pursuant to law; and (3) the need of each such air carrier (other than a supplemental 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. In applying clause (3) of this subsection, the Board shall take into consideration any standards and criteria prescribed by the Secretary of Transportation, for determining the character and quality of transportation required for the commerce of the United States and the national defense.

      . Hawaiian concedes as much when it states:
      This is not to say that the CAB has followed this policy consistently in every single case. However, the policy has been generally followed, and the CAB should have at least explained its departure from it in this case.
      Petitioner’s Br. at 30, n. 26.


source: Caselaw Access Project

author: LEVENTHAL, Circuit Judge:

license: Public Domain

text:
    CONWAY CORPORATION et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Arkansas Power & Light Company, Intervenor.
    No. 73-2207.
    United States Court of Appeals, District of Columbia Circuit.
    Argued Oct. 23, 1974.
    Decided April 4, 1975.

      Robert C. McDiarmid, Washington, D. C., with whom Sandra J. Strebel, Washington, D. C., was on the brief for petitioners.
    John H. Burnes, Jr., Atty., F. P. C. with whom Leo E. Forquer, Gen. Counsel, and George W. McHenry, Jr., Sol., F. P. C., were on the brief for respondent.
    Harry A. Poth, Jr., Washington, D. C., with whom Robert T. Hall, III, Washington, D. C., was on the brief for intervenor.
    Before TAMM, LEVENTHAL and MacKINNON, Circuit Judges.
   Opinion for the Court filed by Circuit Judge LEVENTHAL.

LEVENTHAL, Circuit Judge:

In this case, we hold that the Federal Power Commission’s jurisdiction to review a petition to set aside or reduce a utility’s wholesale electric rate increase permits consideration of the utility’s alleged purpose, and effect, to forestall its customers from competing with it at retail.

On May 31, 1973, Arkansas Power & Light (AP&L) filed with the FPC a wholesale rate proposal that would increase electricity rates to municipally owned systems by 22.6 percent, and to cooperatives by 34.9 percent. Petitioners are municipally owned and cooperative electrical systems that (a)' purchase from AP&L all or a major portion of the electricity they resell to retail customers; and (b) compete with AP&L at retail for large industrial customers, and have historically been able to match AP&L tariffs for such loads. AP&L’s filing would, in some cases, elevate its wholesale rates to petitioners above its retail rates, thus making it impossible for petitioners to maintain parity with AP&L in competing for retail customers.

Petitioners filed a timely Protest, Motion to Reject, and Petition to Intervene, with the Commission. They alleged, inter alia, that AP&L’s increase in wholesale prices represented “an attempt to squeeze petitioners or some of them out of competition, and to make them more susceptible to the persistent attempts of the company to take over the publicly owned systems in the State,” and asked that the proposed rate increase be rejected.

The FPC, by Order of July 31, 1973, accepted, and suspended until January 1, 1974, the proposed rate schedule. Intervention by Petitioners was limited to matters other than the alleged discrimination. In its Order denying intervention on this question the Commission referred to its earlier order in Indiana & Michigan Electric Co., 49 FPC 1232 (1973), which set minimum standards that must be met before protestants can obtain intervention and hearing on anti-competitive issues and avoid disposition made summarily: The petition must clearly specify “1) the facts relied upon, 2) the anti-competitive practices challenged, and 3) the requested relief which is within this Commission’s authority to direct.” Petitioners, the FPC held, had failed to meet the third criterion.

Petitioners’ Amended Petition to Intervene asked that the proposed wholesale rates be reduced to eliminate the price squeeze. It was denied by a Commission order of October 29, 1973, on the same ground. The FPC clarified its former order by characterizing petitioners’ suggested relief as “a rate related not to wholesale costs but rather related to [AP&L’s] industrial rates,” which are not

within the Commission’s jurisdiction. A subsequent petition for rehearing was denied, and a petition for review was filed in this court.

We hold that the FPC has jurisdiction to consider anti-competitive allegations of the sort raised by petitioners and indeed must consider them in determining whether the rate proposed by AP&L is a “just and reasonable” rate.

I. FINALITY OF ORDER BELOW

The Commission contends that the order denying intervention on this issue was not of the “definitive character” required by section 313(b) of the Federal Power Act, 16 U.S.C. § 8257(b) (1970), as construed in FPC v. Metropolitan Edison Co., 304 U.S. 375, 384, 58 S.Ct. 963, 82 L.Ed. 1408 (1938). Although petitioners have been allowed to intervene in the Commission hearing to raise other, unrelated challenges to the proposed schedules, we find this an appropriate order for review at this time.

We may profitably follow the lead of the Supreme Court in defining finality in “pragmatic” terms. See Cox Broadcasting Corp. v. Cohn, - U.S. -, 95 S.Ct. 1029, 43 L.Ed.2d 328 (1975). We are to make “a realistic appraisal ,of tjie consequences” of the challenged action. An order is reviewable when it “impose[s] an obligation, den[ies] a right or fix[es] some legal relationship.” We look to whether there has been “an effective deprivation of [petitioners’] rights.” We find the order denying intervention here so definitive in character and of such a significant and immediate impact on petitioners as to meet this criterion.

Petitioners raise a question of law, which will not be better defined by further development of the record. The FPC has taken a firm position that petitioners have no legal right to FPC consideration of their antitrust allegations. Because it sees the bar to be jurisdictional, the FPC considers the issue closed. It is not deferring consideration of the question or considering the matter in other proceedings. On the contrary, the Commission has repeatedly refused in other proceedings to consider similar allegations. Thus, we are presented with a definitive administrative conclusion on a recurring question of law that will shape numerous unrelated proceedings if judicial review is deferred. Disruption of the orderly process of adjudication is a factor to be considered. But our review now on this point does not interfere with the FPC’s conduct of the proceeding it has already put under way.

There is a need here for swift resolution of the anti-competitive jurisdictional issue, not only because it is recurring, but because the FPC’s determination has a substantial and immediate impact on the parties that cannot be remedied by subsequent agency action. The competitive context in which petitioners operate sets the stage for our analysis. In competing with supplying companies, municipal and cooperative systems seek to maintain customer satisfaction with the quality and price of their service in order to attract new industries and to retain existing customers; continued satisfaction is also necessary to ensure voter support for the municipal systems. At its most basic level, this competition represents a struggle on the part of the municipal and cooperative systems to preserve their independence from their supplier insofar as they compete at retail. The context has been described by Professor Meeks in Concentration in the Electric Power Industry: The Impact of Antitrust Policy, 72 Colum.L.Rev. 64, 78 (1972):

To illustrate, assume that a municipal system is buying all or most of its power from a neighboring private system. There exists between the two an indirect, but very real competition to serve both areas. Unless the municipality has access to alternative sources might well decide to allow the system that furnished the cheapest power to serve both areas. Unless the munciipality has access to alternative sources of economical power . . . the neighboring system can virtually control the performance of the municipal system through its control over the wholesale price of power. Such control by selling systems is probably very common and very effective, primarily because of the almost universal control over transmission by the dominant selling system in an area. This kind of “unfair” competition is usually directed at municipals and cooperatives but also occasionally at small private systems, particularly when the seller is seeking to absorb the smaller system by merger.

Through its position as supplier, AP&L will be able, if there is no FPC jurisdiction to consider the public interest in AP&L’s discriminatory levels, to affect the quality and price of petitioners’ retail service in such a way as to tilt the scales of competition in its favor.

The refusal of the FPC to consider discriminatory treatment between jurisdictional and nonjurisdictional rates will inevitably and immediately affect the context in which long-term contracts will be bargained for, and relatively irrevocable location decisions will be made by potential industrial customers. Judge Friendly has found — we need not go so far — these considerations determinative of the question of finality even where the agency has held that it has jurisdiction and is continuing to investigate an issue on its merits.

The immediate effect of the FPC’s order on the shape of decision-making in the industry is not gainsaid by the possibility that the FPC may set aside the wholesale rate increase in the rate proceeding, and order a refund of overcharges made after the suspension terminated. First, such relief would in a sense be adventitious, and totally divorced from any consideration of the discrimination problem that is claimed to be part of the public interest. Second, the discriminatory charges may last for years before the wholesale rate is reduced, if it is reduced, on other grounds. The initial rate filing in this case, for example, was made on May 31, 1973, and hearings are still being held. Third, the potential discriminatory impact is not limited to the parties in this proceeding, but affects the competitive relationship of suppliers and customer-competitors throughout the country.

The FPC contends that petitioners are not injured because they can still raise “valid” anticompetitive issues— those regarding discriminatory treatment between wholesale customers — in the Commission proceeding. This begs the question: It is clear that the' Commission will not consider the claims that are raised by petitioners and will not give them the protection' they request and may need. Indeed, if we were to peek ahead into the merits to decide jurisdiction, this case would be more appropriate for sustaining jurisdiction on the ground of the strong likelihood of reversal.

II. MOOTNESS

On March 18, 1974, AP&L filed an application for a 22.6 percent increase in its retail electric rates with the Arkansas Public Service Commission. We cannot remand for consideration of this changed factual situation unless we order a reversal of the FPC, since, unreversed, the FPC will abide by its determination that it lacks jurisdiction to consider such factual allegations. Without further factual consideration by the Commission we are unable to evaluate whether the question has been mooted by AP&L’s state application, particularly in light of petitioners’ contentions that the proposed retail rate increase is not sufficiently great and that AP&L has indicated that it. intends to file a second wholesale increase.

III. THE MERITS

A. The Statute

All parties agree that the FPC has the authority to weigh certain allegations of anticompetitive effects, and is indeed required to do so. The “important and broad regulatory power” vested in the Commission by Title II of the Public Utility Act of 1935, 49 Stat. 803, was recently described by the Supreme Court in Gulf States Utilities Co. v. FPC, 411 U.S. 747, 758-59, 93 S.Ct. 1870, 1878, 36 L.Ed.2d 635 (1973), as “clearly carr[ying] with it the responsibility to consider, in appropriate circumstances, the anticompetitive effects of regulated aspects of interstate utility operations pursuant to . directives contained in §§ 205, 206 [16 U.S.C. §§ 824d, 824e (1970)] . ” See also Otter Tail Power Co. v. United States, 410 U.S. 366, 373-74, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973); City of Huntingburg v. FPC, 162 U.S.App. D.C. 236, 241-242, 498 F.2d 778, 783-84 (1974). Gulf States Utilities and Otter Tail, like the present case, concerned alleged anticompetitive efforts by utilities engaged in wholesale and retail sales to squeeze municipal systems and rural cooperatives that both competed with and purchased power from them. In Gulf States certain cities protested, under § 204 of the Federal Power Act, 16 U.S.C. § 824c (1970), a utility’s application for authority to issue bonds; the cities alleged that the proceeds from the proposed bonds would be used to finance anticompetitive activities. Otter Tail was a civil action under § 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 2 (1970), based on various alleged anticompetitive activities — such as refusals to sell, refusals to wheel, the institution of litigation, and the denial of access to other suppliers by means of Otter Tail’s transmission systems — directed against existing and proposed municipal systems. Neither case raised the issue, now before this court, of discriminatory effects caused by differences between wholesale and retail rates.

Sections 205 and 206 of the Federal Power Act, which were passed as part of Title II, expressly require the Commission to weigh discriminatory effects in rate proceedings. Section -205(b), 16 U.S.C. § 824d(b) (1970), prohibits any public utility, “with respect to any transmission or sale subject to the jurisdiction of the Commission,” from maintaining “any unreasonable difference in rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of services.” Section 206(a), 16 U.S.C. § 824e(a) (1970), requires the FPC to determine the just and reasonable rate whenever it, after a hearing, finds that the rate demanded “by any public utility for any transmission or sale subject to the jurisdiction of the Commission ... is unjust, unreasonable, unduly discriminatory or preferential.”

The question presented here is whether the FPC’s authority, and responsibility, under. §§ 205 and 206, extend to claims of discrimination between rates for two classes of service, only one of which is “subject to the jurisdiction of the Commission.”

The FPC and AP&L contend that the Commission cannot grant the relief requested by petitioners because it only has jurisdiction over the wholesale sale. In support of their argument, they point to the Congressional hearings on the Federal Power Act, which suggest that the phrase “subject to the jurisdiction of the Commission” was added to § 205(b) in response to a request by the National Association of Railroad and Utilities Commissioners, which sought to avoid giving the FPC the “power over intrastate rates” that the Supreme Court, in Houston, East and West Texas Rwy. Co. v. United States (Shreveport Case), 234 U.S. 342, 34 S.Ct. 833, 58 L.Ed. 1341 (1914), found had been granted to the Interstate Commerce Commission. During the floor debates Representative Cole of Maryland explained the action of the House Committee in safeguarding the jurisdiction of the states: “[W]e have tried — and I think successfully — to avoid the injection into the Federal control, which this title confers, the extension thereof into intrastate activities in the way that the Shreveport case might permit.”

The “power over intrastate rates” and “the extension [of Federal control] into intrastate activities” that the Shreveport case permitted to the ICC goes far beyond the relief sought by petitioners, for the Supreme Court in Shreveport upheld the power of the ICC to combat discrimination under § 3 of the Interstate Commerce Act of 1887, ch. 104, 24 Stat. 379, 380, by issuing an order directed toward intrastate rates — in that case an order that would permit carriers to increase their intrastate rates above the level approved by the state commission. Petitioners do not ask the FPC to modify or to authorize the modification of retail rates. They have only asked that the interstate rate increase proposed by AP&L be rejected or reduced if the anticompetitive allegations are found to have merit. The legislative history is not adverse to FPC jurisdiction in the case at bar, particularly when it is taken in the context of the broadly procompetitive purposes of Title II.

Turning to text, a common sense reading of the statutory language reveals no requirement that both rates involved in a pattern of discrimination fall within the jurisdiction of the Commission. If Congress had intended so to limit the reach of the statute it could have prohibited the maintenance of unreasonable differences in rates “between classes of service subject to the jurisdiction of the Commission.” A fair interpretation of the statute as it is drafted is, instead, that any sanction imposed by the FPC to remedy an anticompetitive practice is to be addressed to the jurisdictional rate, and that any discrimination in rates that does not involve jurisdictional service, i. e., discrimination between nonjurisdictional classes of service, is left completely to the state regulatory bodies.

The FPC’s position would leave a regulatory gap — -no institution would have authority to consider an undue preference between wholesale and retail rates, even where that preference was deliberately instituted for the purpose of clogging competition, and to reduce interstate wholesale rates. A legislative intention to achieve such a regulatory gap is not to be presumed unless expressly presented. United Gas Improvement Co. v. Continental Oil Co., 381 U.S. 392, 85 S.Ct. 1517, 14 L.Ed.2d 466 (1965); Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 682-83, 74 S.Ct. 794, 98 L.Ed. 1035 (1954).

On the issue before us, we see a statute that confers plenary jurisdiction to review the interstate wholesale rate and to provide relief addressed to such wholesale rate in order to further the public interest. The Commission has latitude to address the matter in consultation with, and after joint hearings with, the state commission. But it cannot wash its hands of the public interest problem as one totally beyond its jurisdiction.

B. Ability of FPC to Consider and Investigate Nonjurisdictional Matters

This interpretation of §§ 205 and 206 may on occasion require the FPC to consider AP&L’s retail rate structures. FPC contends this “would result in this Commission interjecting itself into an area in which it has no jurisdiction.” However, the FPC concedes that it is authorized to consider nonjurisdictional matters when necessary to the exercise of its jurisdictional authority. As it acknowledges in its brief, “[l]ike Section 5(a) of the Natural Gas Act, Section 206(a) of the Federal Power Act authorizes the Commission to consider retail costs. And, . . . Section 206(b) specifically authorizes the Commission to undertake an investigation into certain nonjurisdictional sales.”

Interpreting § 5(a), the Supreme Court has held that “[t]he Commission, while it lacks authority to fix rates for direct industrial sales, may take those rates into consideration when it fixes the rates for interstate wholesale sales which are subject to its jurisdiction.” Panhandle Eastern Pipe Line Co. v. FPC, 324 U.S. 635, 646, 65 S.Ct. 821, 827, 89 L.Ed. 1241 (1945). In Panhandle Eastern, the Court reviewed a rate proceeding in which the Commission had examined a utility’s retail business in order to allocate earnings between the regulated and unregulated business. That case is distinguishable, to be sure, but the underlying principle is one that permits the FPC to consider matters which would be completely nonjurisdictional taken by themselves, but are appropriate for consideration when germane to the meaningful execution of a jurisdictional function.

There are further indications that the Federal Power Act does not contemplate that the FPC is to operate in an airtight chamber, insulated from nonjurisdictional factors. In presenting Title II, the House Committee expressly said: “The new parts . . . contain throughout direction to the Federal Power Commission to receive and consider the views of State commissions.” Numerous statutory provisions implement this vision, authorizing the Commission to consider nonjurisdictional factors and to cooperate with state regulatory authorities. Section 209(b), 16 U.S.C. § 824h(b) (1970), permits the Commission to confer with any state commission “regarding the relationship between rate structures, costs, accounts, charges, practices, and regulations of public utilities subject to the jurisdiction of such State Commission and of the Commission,” and to hold joint hearings with the state authorities. Section 311, 16 U.S.C. § 825j (1970), authorizes and directs the FPC “to conduct investigations regarding the generation, transmission, distribution, and sale of electric energy whether or not otherwise subject to the jurisdiction of the Commission, including the generation, transmission, distribution, and sale of electric energy by any agency, authority, or instrumentality . of any State or municipality or other political subdivision of a State.” See also § 202(a), 16 U.S.C. § 824a(a) (1970), which requires the FPC to give notice to state commissions and “afford each such State commission reasonable opportunity to present its views and recommendations, and . . . receive and consider such views and recommendations” before it establishes any regional district for the coordination and interconnection of electric facilities; and § 302(b), 16 U.S.C. § 825a(b) (1970), which has a similar provision with regard to the fixing by the FPC of rates of depreciation for licensees and public utilities.

In other contexts, the Commission has embraced its responsibility to consider intrastate rate relationships that touch on rate proceedings within its jurisdiction. For example, in Southwestern Public Service Co., 33 FPC 343 (1965), the Commission compared the conditions under which a utility’s various wholesale customers rendered retail service in order to evaluate whether differences proposed in wholesale rates — different rates to investor-owned wholesale customers and' to cooperative wholesale customers —“would seriously prejudice the competitive business relationships” between customers in the two groups. 33 FPC at 350.

C. Authority of the FPC to Grant the Remedy Requested

The Commission has the authority under § 206 to take unduly discriminatory effects into account in determining a just and reasonable wholesale rate, Gulf States Utilities Co. v. FPC, supra. This is the relief that petitioners seek. They do not ask the FPC to increase or decrease nonjurisdictional retail rates, but only to consider the evidence presented by the wholesale customers and, if anticompetitive effects are found to exist, to modify the concededly jurisdictional rates proposed by AP&L to the extent appropriate.

The FPC erroneously construes the petition to intervene as requesting the Commission to “subordinate [its] jurisdiction to that of the state commissions by basing wholesale rates on retail rates.” Petitioners do not ask that the Commission subordinate its discretion to the state commissions or even that it tie the wholesale rate to the retail rate. Rather, they ask the Commission to consider their allegations of anticompetitive conduct, if established, as a factor in deciding whether the proposed rate is just and reasonable, as it does when allegations of anticompetitive effects between two jurisdictional rates are raised. Northern Natural Gas Co. v. FPC, 130 U.S.App.D.C. 220, 225, 399 F.2d 953, 958 (1968). The retail rates charged by AP&L in a market in which it is competing with its own customers are part of the factual context in which the proposed wholesale rate will function; they do not set an authoritative standard for what is a just and reasonable wholesale rate.

The Commission further contends that it cannot grant petitioners’ requested relief because “[wjholesale rates must recover allocated wholesale costs” and petitioners suggest “that the Commission reduce the proposed wholesale rates without regard to costs.” Because the Commission has raised a jurisdictional bar and refused to investigate petitioners’ allegations, we cannot, at this stage, determine whether a wholesale rate low enough to abolish any discriminatory effects would fail to recover allocated wholesale costs. By arguing that any consideration of noncost factors to reduce a proposed rate necessarily produces a rate that fails to recover allocated costs, the Commission seems to assume that there is a single cost-recovering rate. Rather, there is a zone of reasonableness:

Statutory reasonableness is an abstract quality represented by an area rather than a pinpoint. It allows a substantial spread between what is unreasonable because too low and what is unreasonable because too high. To reduce the abstract concept of reasonableness to concrete expression in dollars and cents is the function of the Commission. It is not the disembodied “reasonableness” but that standard when embodied in a rate which the Commission accepts or determines that governs the rights of buyer and seller.

When costs are fully allocated, both the retail rate and the proposed wholesale rate may fall within a zone of reasonableness, yet create a price squeeze between themselves. There would, at the very least, be latitude in the FPC to put wholesale rates in the lower range of the zone of reasonableness, without concern that overall results would be impaired, in view of the utility’s own decision, to depress certain retail revenues in order to curb the retail competition of its wholesale customers.

The case is remanded for further proceedings not inconsistent with this opinion. To avoid any possibility of misunderstanding, we expressly note that we do not intend any indication whether petitioners are entitled to relief on the merits, and we specifically note that on the remand the Commission will have full latitude to consider the significance of AP&L’s rate changes subsequent to the Commission’s order (of October 29, 1973) rejecting Petitioners’ proposed submissions.

So ordered.

      . Petitioners’ Protest, Motion to Reject, and Petition to Intervene, June 28, 1973, J.A. 8.

      . Order of October 29, 1973, Denying Amended Petition to Intervene and Clarifying Prior Order, J.A. 102.

      . Isbrandtsen Co. v. United States, 93 U.S. App.D.C. 293, 297, 211 F.2d 51, 55, cert. denied sub nom. Japan-Atlantic & Gulf Conference v. United States, 347 U.S. 990, 74 S.Ct. 852, 98 L.Ed. 1124 (1954).

      . Chicago & Southern Air Lines, Inc. v. Waterman Steamship Corp., 333 U.S. 103, 113, 68 S.Ct. 431, 437, 92 L.Ed. 568 (1948).

      . National Airlines, Inc. v. CAB, 129 U.S.App. D.C. 180, 187, 392 F.2d 504, 511 (1968), cited in Thermal Ecology Must Be Preserved v. AEC, 139 U.S.App.D.C. 366, 368, 433 F.2d 524, 526 (1970).

      . Compare Overseas National Airways, Inc. v. CAB, 426 F.2d 725 (2d Cir. 1970), where the court refused to review a refusal by the CAB to expand the scope of a proceeding concerning transatlantic passenger charter authority to include the issue of transatlantic cargo charter authority. The court stressed that the CAB had not suggested that the excluded issue would remain closed indefinitely, but had merely deferred consideration. 426 F.2d at 727-28.

      . Compare Ecology Action v. AEC, 492 F.2d 998, 1001 (2d Cir. 1974).

      . E. g., Southern California Edison Co., 50 F.P.C. 836 (1973); Florida Power & Light Co., 50 F.P.C. 1626 (1973); Order of January 3, 1974, in Union Electric Co., Docket No. E-8215; Opinion No. 681 of January 7, 1974, in Commonwealth Edison Co., Docket No. E-7578; Order of February 28, 1974, in Public Service Co. of Oklahoma, Docket No. E-8242; Order of March 14, 1974, in Pacific Gas & Electric Co., Docket No. E-777; Order of April 19, 1974, in Wisconsin Electric Co., Docket No. E-8619.

      . Port of Boston Marine Terminal Ass’n v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71, 91 S.Ct. 203, 27 L.Ed.2d 203 (1970).

      . Cf. Atlanta Gas Light Co. v. FPC, 476 F.2d 142, 147 (5th Cir. 1973).

      . See also Hearings on S. 218 Before the Senate Comm, on Commerce, 89th Cong., 1st Sess., ser. 89-38, at 68 (1965):
      To the large privately-owned electric utility a retail customer, even a large industry, is simply a customer. However, a wholesale customer is frequently also a competitor, actual or potential. The customer at wholesale may not only be a competitor in the fringe area where the two systems are contiguous, but may also be a direct or potential competitor for the commercial and industrial businesses that are able to take costs and conditions of electric service into account in deciding where to locate and which power supplier to patronize.
      The electric power wholesaler may in fact be seeking to put the retailer out of business. This is not merely theoretical. Every year many municipal systems succumb to purchase offers by investor-owned wholesale suppliers.

      . [T]he Court held it sufficient that the order, although merely declaratory, “touches vital interests of carriers and shippers alike and sets the standard for shaping the manner in which an important segment of the trucking business will be done.” . . . [T]he consideration that prompts us to hold the order reviewable — is the likelihood that before the Commission’s investigation is concluded and judicial review can he had, NYSA and ILA will be bargaining for a new agreement; it is important for them to know whether any assessment formula that may be included therein will be subject to Commission review. New York Shipping Ass’n v. FMC, 495 F.2d 1215, 1219-20 (2d Cir. 1974), quoting Frozen Food Express v. United States, 351 U.S. 40, 44, 76 S.Ct. 569, 100 L.Ed. 910 (1956).

      . See, e. g., cases cited in note 8 supra.

      . Jurisdiction to review exclusionary rulings may be sustained even absent significant injury where, in the words of Judge Friendly, the agency’s ruling is “so flagrantly wrong and demonstrably critical as to make it apparent that the agency is not merely courting the possibility of reversal but is running into the certainty of it if the ultimate decision should be against the proponent of the evidence.” Ecology Action v. AEC, supra, 492 F.2d at 1001.

      . Section 205(b) states in full:
      No public utility shall, with respect to any transmission or sale subject to the jurisdiction of the Commission, (1) make or grant any undue preference or advantage to any person or subject any person to any undue prejudice or disadvantage, or (2) maintain any unreasonable difference in rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service.

      . Section 206(a) provides, in full:
      Whenever the Commission, after a hearing had upon its own motion or upon complaint, shall find that any rate, charge, or classification, demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order.

      . Hearings on H.R. 5423 and S. 1725 Before the Comm, on Interstate and Foreign Commerce, 74th Cong., 1st Sess., pt. 3, at 1624 (1935). See also id., pt. 1, at 503; H.R.Rep. No. 1318, 74th Cong., 1st Sess. 8 (1935).

      . 79 Cong.Rec. 10384 (1935).

      . The development of federal regulation of intrastate rates after Shreveport is discussed by Justice Frankfurter in his dissent in Public Service Commission v. United States, 356 U.S. 421, 429, 430-34, 78 S.Ct. 796, 2 L.Ed.2d 886 (1958).

      . Petitioners’ Protest, Motion to Reject, and Petition to Intervene, June 28, 1973, J.A. 29.

      . Petitioners’ Amended Petition to Intervene, August 22, 1973, J.A. 93.

      . Order of October 29, 1973, Denying Amended Petition to Intervene and Clarifying Prior Order, J.A. 102.

      . FPC Br. at 31.

      . H.R.Rep.No.1318, 74th Cong., 1st Sess. 8 (1935).

      . Petitioners’ Amended Petition to Intervene, August 22, 1973, J.A. 93; Petitioners’ Petition for Rehearing, November 5, 1973, J.A. 116.

      . Order of December 5, 1973, Denying Petition for Rehearing, J.A. 119.

      . Order of October 29, 1973, Denying Amended Petition to Intervene and Clarifying Prior Order, J.A. 102.

      . FPC Br. at 32.

      . Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S. 246, 251, 71 S.Ct. 692, 95 L.Ed. 912 (1951) (Jackson, J.).

      . The FPC has acknowledged its ability to deal with this situation:
      It occurs to us that one rate in its relation to another rate may be discriminatory, although each rate per se, if considered independently, might fall within the zone of reasonableness. There is considerable latitude within the zone of reasonableness insofar as the level of a particular rate is concerned. The relationship of rates within such a zone, however, may result in an undue advantage in favor of one rate and be discriminatory insofar as another rate is concerned. When such a situation exists, the discrimination found to exist must be removed.
      Otter Tail Power Co., 2 FPC 134, 149 (1940).


text:
    LOCAL NO. 441, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 74-1259.
    United States Court of Appeals, District of Columbia Circuit.
    Argued Feb. 25, 1975.
    Decided April 4, 1975.

      George A. Pappy, Los Angeles, Cal., for petitioner. Eugene Miller was on the brief for petitioner.
    William Wachter, Washington, D. C., of the bar of the Supreme Judicial Court of Massachusetts, pro hac vice by special leave of court, with whom John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, and Elliott Moore, Deputy Associate Gen. Counsel, N. L. R. B., were on the brief for respondent. John D. Burgoyne, Atty., N. L. R. B., also entered an appearance for respondent.
    Before LEVENTHAL and ROBINSON, Circuit Judges, and MILLER, Judge, United States Court of Customs and Patent Appeals.

       Sitting by designation pursuant to 28 U.S.C. § 293(a).

   Opinion for the Court filed by Circuit Judge LEVENTHAL.

LEVENTHAL, Circuit Judge:

The issue presented in this case is whether the union violated § 8(b)(4)(B) of the National Labor Relations Act, 29 U.S.C. § 158(b)(4)(B) (1970), by picketing for the proscribed objective of forcing a neutral general contractor to cease doing business with the subcontractor with whom the union had a labor dispute.

Carter, the neutral or secondary employer, was engaged in the construction of an inn in Orange, California. Carter contracted with Rollins Communication Inc. (Rollins) to install communications equipment at the inn. Addington, an IBEW representative, had Rollins picketed at the common job site because Rollins was not paying its employees the prevailing area wages and benefits. The picketing complied with the standards of presumptive validity set forth in the Board’s decision in Sailors’ Union of the Pacific (Moore Dry Dock Co.), 92 N.L. R.B. 547 (1950).

The crucial incident upon which the Board relied for its finding of an unfair labor practice was a conversation between Carter and Addington which took place after the picketing of Rollins had commenced. Conflicting accounts of the conversation were presented in testimony before the Administrative Law Judge (ALJ). Carter testified that he asked Addington what he could do to get the job at the inn going. He stated that Addington replied that the pickets would be removed if Carter would give him a letter assuring that Rollins’ men would not go back to work until they received prevailing wages and benefits. (App. 66). Addington testified that Carter approached him and inquired whether he would take down the pickets if Carter had Rollins’ workers removed from the job. Addington then asked for a letter to that effect. (App. 67). The ALJ credited Addington’s account, concluding that “Carter rather than Addington” was “the first to mention getting Rollins’ employees off the job as the quid pro quo for removal of the picket line.” (App. 67).

The ALJ found no unfair labor practice. His decision was based in part on his reading of the Board’s decision in Sheet Metal Workers Int’l Ass’n (Quality Roofing Co.), 169 N.L.R.B. 1014 (1968), and the predicament facing a union agent where, “as here, [the general contractor] asks if removal of the primary employer will make [the picket line] go away.” (App. 68).

The Board reversed the ALJ’s decision. It adopted Carter’s version of his crucial conversation with Addington. After surveying “the entire course of conduct engaged in by the Respondent,” the Board concluded that the union “would not have been satisfied with anything less than the removal of Rollins from the jobsite, and that this unlawful object, as well as the lawful object of maintaining area standards, was reflected in the picketing.” (App. 83).

We have concluded that the record in this case must be remanded to the Board for clarification for the following reasons:

1. The Board’s recital of the facts reflects Carter’s version of the conversation with Addington even though the ALJ had accepted Addington’s account. In so far as there is a direct conflict in testimony between witnesses, a normal trier of fact can have recourse to demeanor evidence. Here it was the ALJ who observed the demeanor of the witnesses, and he credited Addington, not Carter. Assuming, for discussion, that the Board intended to differ with the ALJ — which it may do, for example, on a determination that Carter’s version was more in accord with its assessment of the probabilities of the situation — it was incumbent upon the Board first to identify expressly an awareness that it was disagreeing with the ALJ, especially on a point where he had credited one witness over another, and second, to set forth the basis of disagreement with the ALJ so that we may determine whether the Board’s finding is supported by substantial evidence in the record as a whole. See Universal Camera Corp. v. NLRB, 340 U.S. 474, 493-97, 71 S.Ct. 456, 95 L.Ed. 456 (1951).

2. Board counsel in his brief says that the same result would have been reached by the Board even assuming that Addington’s version of events was correct. (Brief at 10 n. 7). But we do not know whether this would have been the view of the Board. As the Supreme Court recently noted, problems concerning the classification of disputed conduct as “primary” or “secondary” are “among the labor law’s most intricate.” NLRB v. Local 825, International Union of Operating Engineers, 400 U.S. 297, 303, 91 S.Ct. 402, 407, 27 L.Ed.2d 398 (1971). In view of the “fine distinctions” involved, the Board’s decision may have turned on its understanding that the union first raised the possibility that Rollins should be terminated as a subcontractor. See Sheet Metal Workers Int’l Ass’n (Quality Roofing Co.), 169 NLRB 1014, 1015 (1968) (relying in part on the, fact that the union “did not request any neutral contractor to cease doing business with [the primary employer] . [or] make an effort to initiate contact with these contractors); cf. International Bhd. of Elec. Workers (L.G. Electric Contractors, Inc.), 154 NLRB 766 (1965) (union representative initiated idea that primary employer be removed by the general contractor).

3. If the Board concludes that it is willing to accept the ALJ’s version of the facts and still enter an order against the union, it should clarify the basis of its ruling. The court needs to know whether it is the Board’s position that, if a union has a dispute with a primary employer, the union (a) may not have any conversation with a neutral employer, or (b) may have a conversation with a neutral employer but must not refer to the possibility of termination of the primary employer even when that subject is initiated by the neutral employer, or (c) may answer the question raised by the neutral employer by indicating that the picketing would stop if either the primary employer is terminated or pays the prevailing wage, but may not go further and inform the neutral employer that the picketing will cease if he takes the affirmative action of providing written assurance that the primary employer would not be allowed to return to the jobsite unless it pays prevailing wages and benefits. The Board’s brief in this court argues that it was the union’s request for a letter that was determinative in the present case, but it is not clear that this is the Board’s analysis.

It is only in the light of clarification of these matters, and such other clarification of the basis of its decision that the Board may wish to furnish, that the court can discharge its function of determining whether the Board’s order is supported by substantial evidence and is in accordance with law.

So ordered.

      . The ALJ relied at least in part on Carter’s statement on cross-examination that “I do not recall at any time that he [Addington] told me that he wanted them [Rollins’ employees] off of the job, but at all times that he wanted them to be paid the prevailing wages and benefits and until that was done, he wasn’t satisfied” in resolving the conflict in the testimony. (App. 67).

      . See Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. 383, 395, 444 F.2d 841, 853 (1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2233, 29 L.Ed.2d 701 (1971) (The agency must make “clear not only its awareness of what the Examiner had concluded, but also its reasons for taking a different course.”); Retail Store Employees Union, Local 400 v. NLRB, 123 U.S.App.D.C. 360, 362, 360 F.2d 494, 496 (1965) (“[T]he place accorded to findings of a trial examiner in Universal Camera Corp. v. NLRB [340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456] requires the Board ... to state more clearly the basis for its disagreement [with the trial examiner], not merely that it disagrees.”).


author: PER CURIAM:

text:
    Eli M. SPARK, Appellant, v. The CATHOLIC UNIVERSITY OF AMERICA et al.
    No. 74-1336.
    United States Court of Appeals, District of Columbia Circuit.
    Argued Feb. 20, 1975.
    Decided April 7, 1975.

      Edwin Yourman, Washington, D. C., for appellant; Robert Sheriffs Moss & Associates, Washington, D. C., was on the brief, for appellant.
    Nicholas D. Ward, Washington, D. C., with whom Stephen A. Trimble, Richard W. Turner and Richard W. Galiher, Washington, D. C., were on the briefs, for appellees.
    Before LEVENTHAL, ROBINSON and MacKINNON, Circuit Judges.

       Circuit Judge LEVENTHAL did not participate in the decision of this case.

   PER CURIAM:

This is an appeal from a summary judgment dismissing a complaint for lack of federal jurisdiction. Appellant Spark was a Professor of Law employed by appellee Catholic University of America, a private institution. The complaint alleged that he engaged in his first amendment rights to protest certain actions of the Dean of the Law School which lowered admission standards and modified course requirements. It was claimed that as a result of his protests he was denied a pay raise of $1,750 granted to all Professors of Law of equal seniority for the school year 1970-71, that he received a pay raise of only $1,250 for 1971 — 72 while others of the same seniority received $2,000, and that he was forced into retirement at age 65 in 1972 although it was customary to allow continued employment until age 70.

Federal jurisdiction was alleged to lie in the fact that the University receives approximately 25% (about $5,000,000 per year) of its revenues from the Federal Government in the form of (1) Government sponsored instruction and research, (2) grants and payments on contracts for Federal Government sponsored programs, (3) scholarships for students attending the University, and (4) student aid. The amended complaint asserted that “the United States of America . has by reason thereof become so involved in the conduct of the University that its activities are also those of the Federal Government and are performed under the aegis of the Federal Government.” (J.A. 91.) This supposedly converted the University into a quasi-public agency and subjected its personnel decisions to the requirements of the first and fifth amendments.

In response to the University’s motion for summary judgment, the District Court dismissed the complaint for lack of federal jurisdiction, without holding a hearing on the motion. In support of its motion for summary judgment, the University, by affidavit of C. Joseph Nuesse, Executive Vice-President and Provost, admitted that the Government funds various programs but denied that it exercises any control over curriculum or personnel as a result of this funding. (J.A. 126-27.) The court in its order dismissing the amended complaint with prejudice specifically found that “the Catholic University of America is a private institution of higher learning over which the Federal Government exercises no direction, supervision or control with respect to its curriculum, program of instruction, administration or personnel and that said Catholic University is not an arm of the United States Government . . . (J.A. 150-51.) Appellant’s motion for reconsideration was denied and this appeal followed.

Appellant argues that the trial court was required to afford him an oral hearing before ruling on the motion for summary judgment and that his complaint alleged a “federal question” sufficient to confer subject matter jurisdiction under 28 U.S.C. § 1331(a).

1. Need for a Prior Hearing: In acting on the motion for summary judgment without affording appellant a hearing and the opportunity to present oral argument, the court relied on D.C. District Court Rule 1 — 9(e) which places the decision to allow an oral hearing in the sole discretion of the court. Appellant argues that this procedure violates Rule 56(c), Fed.R.Civ.P., which provides that a motion for summary judgment “shall be served at least 10 days before the time fixed for the hearing.” However, Rule 78 provides:

To expedite its business, the court may make provision by rule or order for the submission and determination of motions without oral hearing upon brief written statements of reasons in support and opposition,

and Rule 83 provides:

Each district court by action of a majority of the judges thereof may from time to time make and amend rules governing its practice, not inconsistent with these rules.

While it is clear that due process does not include the right to oral argument on a motion, see e. g., Morrow v. Topping, 437 F.2d 1155 (9th Cir. 1971), there is a division of authority among the circuits on the issue of whether a motion for summary judgment may ever be granted without affording a hearing to the adverse party. The Fifth and Ninth Circuits have held that a hearing is required; the Fourth, Seventh, Eighth and Tenth Circuits have held that oral argument may be avoided in appropriate circumstances, although some of these latter decisions indicate that a hearing should be held in most instances. We believe that the decisions permitting the trial court to dispense with oral argument state the sounder rule of law.

We find that the denial of the oral hearing was proper in this case. Appellant was given an ample opportunity to demonstrate subject matter jurisdiction through his affidavits in opposition to summary judgment. Furthermore, he was allowed to amend his complaint one time before it was dismissed. No showing has been made that an oral hearing would have produced any further evidence to enable the District Court to find federal jurisdiction. We therefore adopt the construction of the Rules which permits the District Court to dispense with oral arguments in appropriate circumstances in the interest of judicial economy, find that this case presented such circumstances and accordingly affirm that aspect of the District Court’s decision.

2. Federal Jurisdiction: In his opposition to the motion fot summary judgment, appellant argued that he had raised two genuine issues of material fact: (1) Whether the Government furnishes substantial sums of money to the University, and (2) Whether as a result of this financial assistance the Government has become so involved in the conduct of the University that its activities have become governmental action. Regarding the first issue, the University did not contradict appellant’s description of the types and amounts of funds it received from the Government. However, its affidavit did assert that the Government does not exercise any direction, supervision or control over its curriculum, program of instruction, administration or personnel. \JA. 127). Appellant did not contradict the accuracy of that statement by alleging any examples of Government control but merely continued to assert that the Government had become involved in the conduct of the University “by reason of its financial assistance.” (J.A. 148.) Furthermore, his statement of genuine issues (J.A. 149-50) only referred to Government involvement in terms of federal funding. Thus the extent of the governmental involvement was no longer in dispute.

Appellant’s second “issue” is the legal question of whether the receipt of federal funds to the extent shown in the affidavits converts a private institution into an agency of the Government sufficient to establish federal question jurisdiction. Such an issue of law should be no barrier to a summary judgment. Appellant’s contention that summary judgment can not be used to resolve a dispute over the existence of a federal question is simply erroneous. The decision of the District Court was merely a determination that the allegations in the complaint and the uncontroverted affidavits were legally not sufficient to establish federal jurisdiction. The need to “sift facts and weigh circumstances” to determine “State involvement” described in Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1969), was satisfied in this case by an analysis of the extent of the federal involvement as set out in the complaint and the affidavits.

The only remaining question is the validity of the District Court’s finding that it did not have jurisdiction over the complaint because the Government exercises no control over the University’s activities. Each party cites numerous cases dealing with the amount of governmental involvement which is necessary before a private entity becomes sufficiently entangled with governmental functions that federal jurisdiction attaches. If any principle emerges from these cases, it would appear to be that, at least where the question of race is not involved, it is necessary to show that the Government exercises some form of control over the actions of the private party. In the present case, the statutes under which the University received the funds specifically prohibit the Federal Government and its agents from exercising any supervision or control over or participating in the activities of the University. Appellant neither alleged that the Government was not complying with these statutes nor claimed that any connection existed between the funding activities of the Government and the various decisions by University officials concerning his employment status.

The fact that the Federal Government contributes funds to the University, by itself, is insufficient to show the exercise of influence on University decision-making or the encouragement of specific policies. In Grossner v. Columbia University, 287 F.Supp. 535 (S.D.N.Y.1968), the court responded to a similar situation as follows:

A more fundamental point against plaintiffs is that receipt of money from the State is not, without a good deal more, enough to make the recipient an agency or instrumentality of the Government. Otherwise, all kinds of contractors and enterprises, increasingly dependent upon government business for much larger proportions of income than those here in question, would find themselves charged with “state action” in the performance of all kinds of functions we still consider and treat as essentially “private” for all presently relevant purposes. See Simkins v. Moses H. Cone Memorial Hospital, supra, 323 F.2d [959] at 967 (4th Cir. 1963), cert. denied, 376 U.S. 938, 84 S.Ct. 793, 11 L.Ed.2d 659 (1964).

287 F.Supp. at 547-48. Although Grossner dealt with the use of state funds by a private university, its language is equally applicable to the instant case. It has also been held that governmental penetration into the affairs of a private university sufficient to establish federal jurisdiction will not arise from government chartering, from the granting of tax exempt status, or from the requirement that the university comply with federal anti-discrimination statutes as a condition for receiving the funds. Since appellant did not allege any additional federal involvement in the affairs of Catholic University beyond the contribution of federal funds, we conclude that federal jurisdiction does not exist in this case.

We also note that appellant is contemporaneously pursuing a contract action in the Superior Court for the District of Columbia. While we have not relied upon that fact in the disposition of the instant appeal, it appears that appellant is not without a forum for his claims.

The order of the District Court dismissing with prejudice appellant’s Amended Complaint for lack of federal question jurisdiction is accordingly

Affirmed.

      . D.C. District Court Rule l-9(e) provides: A party may in his motion or his opposition specifically request an oral hearing, but the allowance of an oral hearing shall be within the sole discretion of the court.

      . Georgia Southern & F. Ry. Co. v. Atlantic Coast Line R. Co., 373 F.2d 493, 496-98 (5th Cir.), cert. denied, 389 U.S. 851, 88 S.Ct. 69, 19 L.Ed.2d 120 (1967); Dredge Corp. v. Penny, 338 F.2d 456, 461-62 (9th Cir. 1964).

      . Parish v. Howard, 459 F.2d 616 (8th Cir. 1972); Hazen v. Southern Hills Nat’l Bank, 414 F.2d 778, 780 (10th Cir. 1969); United States Fidelity & Guaranty Co. v. Lawrenson, 334 F.2d 464, 466-67 (4th Cir.), cert. denied, 379 U.S. 869, 85 S.Ct. 141, 13 L.Ed.2d 71 (1964); Sarelas v. Porikos, 320 F.2d 827 (7th Cir. 1963), cert. denied, 375 U.S. 985, 84 S.Ct. 519, 11 L.Ed.2d 473 (1964). See also Season-all Industries, Inc. v. Turkiye, etc., 425 F.2d 34 (3d Cir. 1970).

      . Cf. Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d. 477 (1974) (regulated utility); Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972) (state liquor license); Wahba v. New York University, 492 F.2d 96 (2d Cir.), cert. denied, 419 U.S. 874, 95 S.Ct. 135, 42 L.Ed.2d 113 (1974) (private university receiving research grants); Junior Chamber of Commerce of Rochester, Inc. v. United States Jaycees, 495 F.2d 883 (10th Cir.), cert. denied, 419 U.S. 1026, 95 S.Ct. 505, 42 L.Ed.2d 301 (1974) (private organization receiving federal funds); Blackburn v. Fisk University, 443 F.2d 121 (6th Cir. 1971) (state chartered private university); and Grossner v. Trustees of Columbia University, 287 F.Supp. 585 (S.D.N. Y.1968) (state funding of private university), all finding insufficient governmental involvement, with Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961) (restaurant leased from government-owned parking facility); Sams v. Ohio Valley General Hospital Assn., 413 F.2d 826 (4th Cir. 1969) (private hospitals); Powe v. Miles, 407 F.2d 73 (2d Cir. 1968); Hammond v. University of Tampa, 444 F.2d 951 (5th Cir. 1965) (private university using municipal property); Simkin v. Moses H. Cone Memorial Hospital, 323 F.2d 959 (4th Cir. 1963) (private hospital receiving Hill-Burton funds); and Kerr v. Enoch Pratt Free Library, 149 F.2d 212 (4th Cir.), cert. denied, 326 U.S. 721, 66 S.Ct. 26, 90 L.Ed. 427 (1945) (privately endowed library), each finding that federal jurisdiction existed.

      . See Bright v. Isenbarger, 314 F.Supp. 1382, 1392-94 (N.D.Ind.1970), aff'd, 445 F.2d 412 (7th Cir. 1971); Coleman v. Wagner College, 429 F.2d 1120, 1127 (2d Cir. 1970) (Friendly, J., concurring).

      . 20 U.S.C. § 1232a provides:
      § 1232a. Prohibition against Federal control of education.

      No provision of the Act of September 30, 1950, Public Law 874, Eighty-first Congress; the National Defense Education Act of 1958; the Act of September 23, 1950, Public Law 815, Eighty-first Congress; the Higher Education Facilities Act of 1963; the Elementary and Secondary Education Act of 1965; the Higher Education Act of 1965; the International Education Act of 1966; or the Vocational Education Act of 1963 shall be construed to authorize any department, agency, officer, or employee of the United States to exercise any direction, supervision, or control over the curriculum, program of instruction, administration, or personnel of any educational institution, school, or school system, or over the selection of library resources, textbooks, or other printed or published instructional materials by any educational institution or school system, or to require the assignment or transportation of students or teachers in order to overcome racial imbalance. (Pub.L. 90-247, title IV, § 422, as added Pub.L. 91-230, title IV, § 401(a)(10), Apr. 13, 1970, 84 Stat. 169.)
      This statute superseded 20 U.S.C. §§ 402, 757 and 1144 which contained similar restrictions.

      . Blackburn v. Fisk University, 443 F.2d 121 (6th Cir. 1971).

      . Browns v. Mitchell, 409 F.2d 593 (10th Cir. 1969).

      . Wahba v. New York University, 492 F.2d 96 (2d Cir.), cert. denied, 419 U.S. 874, 95 S.Ct. 135, 42 L.Ed.2d 113 (1974):
      Congress has specified one constitutional command, a prohibition of racial discrimination, which those engaging in federally financed projects must respect. This very specification affords some indication that the Government did not mean to require compliance with other constitutional guarantees; we do not think the Constitution imposes them proprio vigore.

      492 F.2d at 102.