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contract. That is not constitutional. A contract might be violated without violating the Constitution. It is the violation of a contract.

Mr. WESTWOOD. The Chief Justice, in his opinion in the Perry case, Perry v. U.S. (294 U. S. 330), dealing with the gold-clause cancelation, of course, seems to indicate that there might be a limitation upon the power of Congress; but may I say this, Mr. Congressman, that the Colonel is not here resting upon any constitutional grounds. He has been discussing

Mr. ELLENBOGEN (interposing). I want to know whether any of these methods violate existing contracts.

Mr. WESTWOOD. May I answer that specific question by saying that, in my judgment, the only constitutional question that may arise would be that which would come if there were no "grandfather" clause at all in the bill. That is all. I think that is all the Colonel meant to say.

Mr. ELLENBOGEN. Well, the first method has no such provision.

Mr. WESTWOOD. If the first method were adopted, presumably there would also be a "grandfather” clause in the bill, just as there always is in all bills of this sort, where a new regulatory device is adopted.

Now, that “grandfather” clause would simply say that existing carriers should receive certificates automatically. That, indeed, is the provision as it appears in the original S. 2 introduced by Senator McCarran in the Senate.

That provision was also in the bill introduced in the Senate previously. Then it was further provided that additional carriers, or existing carriers with respect to new service, might apply for a new certificate or for an amendment to an existing certificate.

Now, if the first method, with respect to authorizing the carriage of mail, were to be adopted, or recommended by this committee, then there would be a provision saying that whenever a certificate were issued, whether by virtue of the "grandfather” clause or by virtue of the clause with respect to new applications, that certificate would automatically carry with it the authorization and the obligation to carry the mails.

Now, if that is done, I would not advise Colonel Gorrell that there was any constitutional question, and I do not believe that he would suggest that there would be. It is only in the event a “grandfather” clause were left out of the bill that there could be any possibility of a constitutional doubt.

Mr. ELLENBOGEN. I object to your use of the term "constitutional.” The term you should use is "existing contracts.”

Mr. WESTWOOD. Well, possibly. Mr. ELLENBOGEN. “Violation of existing contract”; not “violation of the Constitution.”

Mr. WESTWOOD. Possibly that may be a more accurate way of describing it, Mr. Congressman.

I used the term "constitutional" only because it was used in the Perry case dealing with the gold clause.

Mr. WADSWORTH. The sanctity of contracts rests upon the constitutional provision?

Mr. WESTWOOD. So the Chief Justice said in the Perry case.

Mr. ELLENBOGEN. Any person who violates a contract has to pay damages, and so does the Government.

Mr. WADSWORTH. The Government cannot be sued without its consent.

The CHAIRMAN. So far as the constitutional power is concerned, Congress has the power to violate the sanctity of a contract, has it not?

Mr. WESTWOOD. Well, I must confess that I have difficulty in answering constitutional questions with any degree of confidence, Mr. Chairman, but as I have read and tried to understand the Perry case dealing with the gold-clause question-and you may recall that in that case, in one of the several cases involved, there was the question of the Government's power to cancel its own contracts as distinguished from the question of the Government's power to alter the contractual obligations of other parties I believe that the Chief Justice's language in the opinion dealing with that precise question indicated that the Government of the United States itself, having itself pledged its word as a sovereign, might not be able to breach the promise it had made without providing some reasonable alternative in the way of compensation or otherwise.

Justice Stone dissented from that view or at least indicated that that question need not have been passed upon.

Now, as in all constitutional questions, we get cases here and there and try to predict what the court might do in a given situation, and that is the only reason I suggested in discussing this matter that here might possibly be a constitutional doubt in the event a "grandfather" clause were not included; but I did not mean, and the colonel did not mean, that as between the three methods, three possible methods of determining who should be authorized to carry the mail, constitutional considerations are controlling,

Mr. REECE. Because you were going on the assumption if the first plan should be adopted, a "grandfather” clause should also be included.

Mr. WESTWOOD. That is right.

Mr. ELLENBOGEN. I am not certain that you have any contract, because one of the essential elements of a contract is the price. That is Hornbook law, that a contract which does not fix the price is not a contract.

Mr. WESTWOOD. Mr. Congressman, the provision of the law is that a fair and reasonable mail rate will be guaranteed in the event the contract is extended.

So that, once the extensions occurred, you then have something which seems rather more than a normal contract right. That is, you have on the one hand an indefinite obligation to carry the mails and on the other a right to the party--well, we will call him the mail contractor—to receive fair and reasonable compensation.

Now, that looks like a pretty substantial right.
Mr. MARTIN. Mr. Chairman-
The CHAIRMAN. Mr. Martin.

Mr. MARTIN. Is not this the practical situation, that ultimately will develop, that with the "grandfather clause" in the act--and I may say I think it ought to be there I feel that the carriers that have built up aviation and now have mail contracts should ipso facto be given certificates of necessity and convenience and their contracts continued.

But, if that is done, would not the first plan eventually come into the picture! At the same time that the "grandfather clause” was adopted, the giving of certificates to other carriers could also be adopted which would qualify them for the mail service, and then, when new fields were developed, new business came in, maybe some old carriers went out, and so forth, the first rule would come into play and the two could coexist.

What practical difficulty is there in the coexistence of the two rules, provided you give the existing carriers the priority involved in the "grandfather clause" and it is compulsory without any further qualification?

Mr. WESTWOOD. May I suggest two examples, or two situations, just for the purpose of considering the problems that your question raises?

Mr. MARTIN. Yes.

Mr. WESTWOOD. Let us assume first a situation where today there are two or more carriers between existing points. One of those carriers today is carrying the mail, is authorized to carry the mail. The other carrier is not authorized to carry the mail. Or, there may be more than one other carrier not authorized to carry the mail.

Now, that is one situation I want to speak about.

Another situation has to do with points where there is today no service, but where in the future it might well be that there might be two persons, two carriers, who would carry passengers. That was the example the colonel mentioned. And yet there might not be enough mail service to make it practicable, from an economical standpoint, to spread it over the two carriers.

Now, as to the first example, the situation where one carrier today carries the mail, but where there may be more than one carrier in operation between existing points: If the first method were adopted, the result would be that the carrier who today does not carry the mail, but carries passengers or property between those two points, would, under the "grandfather clause", automatically receive the authorization likewise to carry the mail.

So that immediately, the day after the bill is passed, in every section where today between existing points two or more carriers are in business, only one of which has the authority to carry the mail, on the day after the bill is passed, I say that that mail traffic would immediately be spread between the two or more carriers.

Mr. MARTIN. Would that be the case with the “grandfather” clause in the act?

Mr. WESTWOOD. I believe it would.

Mr. MARTIN. It is my understanding that it would be directly the contrary. I thought, under the "grandfather” clause, that the carrier who now has a mail contract would get a certificate ipso facto and the continuance of his mail contract.

Mr. WESTWOOD. Maybe we are not talking about the same thing. Maybe what the colonel has described as the second method is what you have in mind.

May I just, for a moment, review what the second method was as set out in this bill?

Mr. MARTIN. Yes.

Mr. WESTWOOD. The "grandfather” clause provides that existing carriers should receive a certificate. That certificate shall authorize

them to carry passengers and property, between all points where they are now in service. It also authorizes them to carry the mail between the points where they are now authorized to carry the mail.

Now, that is, roughly speaking, the “grandfather” clause in H. R. 5234.

Mr. MARTIN. I understood Colonel Gorrell designated that as the second method.

Mr. WESTWOOD. Yes.
Mr. Martin. And he gave the certificate method first.

Mr. WESTWOOD. That is right. Now, there is this to be added to the second method. As I say, we may really be talking about the same thing.

Next, with respect to carriers who do not receive authorization by virtue of the "grandfather” clause to carry the mail, paragraph (m) of section 305 of H. R. 5234, would deal with that situation,

Then, whenever the Postmaster General found that there should be an extension of the mail service, he would certify the fact, and this authorization would be given.

So that the new authorization to carry the mail would be given. There would be indefinite room for expansion, but the point is that with respect to the carriage of the mail and the relation of the carriage of the mail to the "grandfather” clause, H. R. 5234 applies precisely the same principle that it applies with respect to carriage of persons and property.

So that existing carriers, by virtue of the "grandfather” clause in H. R. 5234, would receive the authority to carry passengers and property, where they now carry passengers and property and would receive the authority to carry mail where they now carry mail, and by virtue of paragraph (m), additional authority to carry the mail could be granted when it was necessary.

Mr. Martin. Do you consider the bill satisfactory as it is?

Mr. WESTWOOD. That is the colonel's judgment; yes. And, I think that he was just about to discuss the possible change that Commissioner Eastman had suggested.

Mr. ELLENBOGEN. Mr. Chairman
The CHAIRMAN. Mr. Ellenbogen.

Mr. ELLENBOGEN. Under the law now existing, paragraph 6, subsection (c), the Interstate Commerce Commission can terminate contracts that are of an indefinite nature upon 60 days' notice.

Mr. WESTWOOD. After hearing, is it not?

Mr. ELLENBOGEN. Well, without cause, upon notice for whatever it may consider reasonable; but no cause is necessary under that section as I read it.

Mr. WESTWOOD. As I say, Mr. Congressman, that section has never been construed in the courts, and I would not advise the colonel that there was anything clear about it. However, when Congress has provided for cancelation of an indefinite obligation and authorization to carry mail, and where that cancelation is to occur only after notice and hearing, presumably it is intended that there should be something about which a hearing should be held, which would seem to mean that there would have to be some reason for cancelation.

Now, a question of that sort of course is not clear and I, as a lawyer, would not seek to advise the colonel that there is anything definite and absolute or clear about it, and the colonel did not sug

gest that.

What the colonel suggested was that there must be provision for a "grandfather" clause, and I think there must. I think that it will be agreed that that is a serious question.

Mr. ELLENBOGEN. There is no question about any of the methods proposed.

Mr. WESTWOOD. That is true, perfectly.
The CHAIRMAN. Colonel Gorrell, will you proceed.

Mr. GORRELL. What Mr. Eastman suggested was the possibility that paragraph (m) of section 305 might be eliminated. In his letter to the committee he pointed out that without this paragraph the bill permits any air carrier to apply at any time for a new certificate, or an amendment to an existing certificate, authorizing a new mail service, and the suggestion was that this is sufficient to the needs of the postal service. Such a change would amount to an adoption of what I have described as the third possible method of dealing with the question of authorizing mail carriers. That is, were this suggestion adopted, existing mail carriers would receive authorization to carry the mail by virtue of the "grandfather” clause, and any new mail service would be granted only when an application for new service was made and when the Commission found that the service should be authorized. Since notice of an application for mail service must be given the Postmaster General, by virtue of section 305 (c), it is, of course, apparent that the Postmaster General would be enabled to give his views to the Commission regarding the necessity for any new mail service applied for, and in the last analysis the method of authorizing such service would be very similar under Mr. Eastman's suggestion to the method as contemplated by the bill with paragraph (m) of section 305 retained.

However, there is one important difference between these two methods, which results from the presence of paragraph (m), and this difference seems to mę sufficient to warrant the retention of that paragraph. The difference is that with paragraph (m) in the bill, the initiative in the matter is in the hands of the Postmaster Gen. eral. His function in bringing about extensions of the mail service is a highly important one. As a customer of the air carriers he is much more important than potential passengers or potential shippers

of express. This is true not only because of the volume of mail traffic, but more expressly because of the public interest in the mail. It would seem important that his initiative in the matter should be fully recognized, and that a formal method should be provided whereby he could make certification as to the need for additional mail service, showing what is required, and thus precipitating on his own motion the authorization of the service which he finds necessary. Were paragraph (m) to be eliminated, the only way that he could bring about additional mail service would be through resorting to a procedure which might well prove distasteful to him, namely, communicating with existing or potential air carriers and suggesting to them that they apply for the requisite authorization.

The only objection suggested by Commissioner Eastman's letter to paragraph (m) of section 305 is that there is constant pressure from the communities all over the country for air-mail service. But the elimination of paragraph (m) would not eliminate this pressure. If the paragraph were eliminated, whenever an applicant for new mail service appeared the pressure would be quite as operative as it would

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