EVANSVILLE AIRPORT v. DELTA AIRLINES

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Argument of John K. Mallory, Jr.

Chief Justice Warren E. Burger: We will arguments in the Evansville-Vanderburgh Airport Authority against Delta Airlines.

Mr. Mallory.

Mr. John K. Mallory, Jr.: Mr. Chief Justice and may it please the Court.

The Supreme Court of Indiana in this case rested its decision entirely on the Commerce Clause and declared the ordinance invalid under the Commerce Clause.

It filed the validity there and stated that it did not therefore reach the other constitutional issues in the case that had been decided by the Trial Court.

The Trial Court had decided the ordinance invalid under the constitutional right to travel, the Fourteenth Amendment, Privileges and Immunities Clause and Equal Protection Clause and it also found it invalid under the Indiana Constitution.

We contend unconstitutionality under all of these and particularly under the constitutional right to travel.

However since I am seeking affirmance of the Indiana Supreme Court decision, I intend to limit or to rely principally or discuss principally the Commerce Clause decision by it.

The crucial issue, I submit under the Commerce Clause is whether or not, this is a use tax.

The case has been argued and I think briefed by the other side on the assumption that it is a use tax.

The cases it cites, the highway use cases principally are use tax cases.

It is my submission to this Court that the tax is not a use tax case.

It is not a use charge.

It is not a service charge.

Rather it is a charge or a tax on the passenger for the act of enplanement.

That is, it is a charge on the passenger for the act of boarding the aircraft for the purpose of departure 88% of the people who are enplaning at this airport or enplaning for an out of state place.

The question and issue of whether or not this is a use tax has been before the Court’s on four states and it has been present in these cases since these ordinances gained popularity some four years ago.

It has been and was discussed directly before the Trial Court and the Indiana Supreme Court.

In this case, they decided that it was not a use tax.

It was not a charge for use and that it was dependent solely on the act of enplanement.

It was before the Montana Supreme Court in a very similar case Except that in the Montana case, the charge was nominally levied on the air carrier rather than on the passenger.

Justice William H. Rehnquist: Mr. Mallory.

Mr. John K. Mallory, Jr.: Yes, sir.

Justice William H. Rehnquist: Is the distinction you are drawing between a use tax and the kind of tax you say, this is one that depends on the intent of the legislature?

Mr. John K. Mallory, Jr.: No, Mr. Justice Rehnquist.

It depends on the incidence of the tax.

The taxable event set forth in the ordinance or the statute.

And the taxable event set forth here is not use of the airport facilities by the passenger.

It’s the act of enplanement, that is boarding the aircraft for the purpose of departure under the ordinance itself.

Justice William H. Rehnquist: Would you concede that the airport district could have somehow passed along some of its costs to the passenger by a similar tax if it were not made incidental to the enplanement?

Mr. John K. Mallory, Jr.: But when you say similar tax, I have some problems, but where certainly, one can conceive of the Airport Board putting up the turnstile as you enter the airport terminal that all users have to put in a dime or 25 cents or whatever and walk through the turnstile to use the airport terminal.

I think I would have a much different argument and a much harder argument than I have here.

Chief Justice Warren E. Burger: Mr. Mallory, if --

Mr. John K. Mallory, Jr.: Yes, Mr. Chief Justice.

Chief Justice Warren E. Burger: If the statute or regulation under which they are imposing this charge also required them to pay $1.00 for every passenger sitting in the plane when it landed, how would that affect your view of the situation?

Mr. John K. Mallory, Jr.: I would think that that would be quite clearly unconstitutional Your Honor under the large number of cases that say that State cannot tax the act of transportation which is really the basis for the cases that we rely on here under the Commerce Clause.

Chief Justice Warren E. Burger: Well, I raised that because you were emphasizing, I thought quite heavily, the act of enplaning?

Mr. John K. Mallory, Jr.: No, I would not differentiate that from the act of deplaning, Your Honor.

I am differentiating it from the act of the passenger using the airport terminal on which this tax is not levied.

Chief Justice Warren E. Burger: Well, in my hypothetical, I was not limiting it to the deplaning.

All the people who were sitting on the airplane when it hits the runway whether they are getting off or continuing, then it would be certainly for the use of the airport or clearly, would it not?

Mr. John K. Mallory, Jr.: I would want to see the ordinance.

I do not think that it would be for the use of the airport more clearly.

I think that it would then for the act of landing in an aircraft.

It will depend on the statute of the ordinance, obviously.

But I think it would be for the act of landing in an aircraft there.

I think this question raised a point that should be emphasized here.

In arguing the unconstitutionality of this ordinance or of a statute similar to this, I am not contending and I do not want to be misunderstood that there is no way that the Airport Board can increase its income or can make as the other side says can make interstate commerce pay its fair share.

The case is a liegemen under which states and localities have made interstate commerce pay its fair share.

They are properly apportioned gross receipts taxes, properly apportioned net income taxes, in this case, we have landing fees, in this case, we have rentals and there are privilege taxes.

There are any number of ways that the state can make interstate commerce pay its fair share.

So, I am contending that these ordinances, with the incidence on the tax of enplanement or invalid as a tax on direct tax on interstate Commerce and that the dangers of such a tax in multiple taxation emphasize the burden that will be placed on interstate commerce.

Justice William H. Rehnquist: But isn’t your real complaint a the lack of apportionment between other users because if your same enplaning passenger had to pay 50 cents as he went to the turnstile of the airport, as opposed to having to pay a dollar fifteen minutes later, that wouldn't make all of much difference if the apportionment was fair, was it?

Mr. John K. Mallory, Jr.: Your Honor, you are saying that the state can –- with all respect, it seems to me you are saying that the amount of money that the state can raise would be the same under the two circumstances.

But it seems to me the first question and it seems to me Spector teaches this and a number of other Freeman against Hewit and McLeod against Dilworth case, that the first thing that one has to consider is not whether the state may validly raise money in some fashion on interstate commerce but what the constitutional channel through which it attempts to raise it is and whether that constitutional channel is, in fact, constitutional or unconstitutional.

And what I might -- statement about the turnstiles was not that enplaning passengers would have to drop the dime or quarter in the turnstile.

It was that all users would have to do it and that the act of taxation.

The taxable event was not enplaning in interstate commerce but on the use of the airport.

Justice William H. Rehnquist: But the enplaning passengers would have to go through the turnstile too.

Mr. John K. Mallory, Jr.: Oh yes!

Yes, Your Honor.

They would have to go through the turnstile.

And they would have to pay for the use of the airport terminal.

Justice Thurgood Marshall: Mr. Mallory, what would happen if they raised the regular fees for landing and taking off which they now have by $1.00 each passenger?

Mr. John K. Mallory, Jr.: In other words, Your Honor, if the ordinance read that landing fees will be increased by one dollar per enplaning passenger, there I think that I come back that the taxable event is the active enplanement.

And under the -- basically from Crandall against Nevada to the extent that that may be viewed as a Commerce Clause case right after the –-

Justice Thurgood Marshall: What about the fact that one of the measures of the landing fees is the weight of the plane?

So I mean, the more passengers has more weight, isn't it?

Mr. John K. Mallory, Jr.: Yes, Your Honor.

So long as the landing fee depends on the weight of the plane, I have no problem with it.

That is the type of use tax that has been upheld where the use of the highways, the truck depends on the weight, or the amount paid by the trucker depends on the weight of the truck and so on.

But anytime the tax is a tax that is on the passenger, as this one is measured on the carrier measured by a flat amount per head by the passenger.

Justice Thurgood Marshall: But then Mr. John would you say, it made no difference if you raised a dollar a head that you would charge it to the passenger anyhow, so they just --

Mr. John K. Mallory, Jr.: Your Honor, that gets into the -- Obviously, the airlines passed on charges but where the charge is a dollar or two dollars a head or whatever it may be from a particular airport, that is passed on direct from that airport.

And it removes the ability of the carrier and from the CAB, the idea of apportioning its rates in such a way as to serve aviation generally.

Justice Thurgood Marshall: Now, my final question is that there was nothing in the airport except the airline booths and the charge facilities.

There’s nothing else.

And you have a $1.00 turnstile outside, what would your position be?

Mr. John K. Mallory, Jr.: I suppose if one could argue that that would be excessive and I suppose that one could argue that it was in fact a tax on enplanement and therefore unconstitutional.

As I said to Mr. Justice Rehnquist, on the turnstile question, I do not say that that is clearly constitutional.

All I say on that is that I have a very different argument and what I would conceive to be a much more difficult argument than I have in this case.

Justice Thurgood Marshall: Would it be more difficult if you had it out on a parking lot?

Mr. John K. Mallory, Jr.: Yes, Your Honor.

It really would if you have the charge –- if you have a toll charge on an access rather than one has to use to get into the airport.

Clearly, that is a much harder case and a much different case.

Now, on the question of the operating need, Mr. Trockman yesterday stated that the Airport Board had an operating deficit and I do not contest that.

I think it might be well to put it in some perspective.

The total operating income in 1967 of the Board was some $268,900.00.

That was raised about equally by and this is exclusive of property taxes in the area.

That’s about equally from aviation sources and non-aviation sources (Inaudible) that was the total operating.

The total operating disbursements exclusive of bond retirement of a $166,000.00 leaving an operating profit exclusive of bond retirement of approximately $100,000.00.

The bond retirement cost was $182,000.00.

Incidentally, this is shown, these figures are taken from paragraph 25 in appendix page 59 and from exhibit 5 to the stipulation of facts which was not printed.

The only figure taken from exhibit 5 is the operating disbursements and the breakdown of the income between aviation and non-aviation sources.

As I said, the bond retirement costs were $182,000.00.

The operating profit exclusive of the bond retirement was about $100,000.00.

You had a deficit of something less than a $100,000.00 including the bond retirement in the operating expenses.

I do not have the figure in the record but the 1970 Annual Report of the Airport Board shows that about 20.56% of the general fund revenues come from property taxes.

Now, that does not include the amount that goes of property taxes that goes into the building fund for the airport.

Chief Justice Warren E. Burger: During this period that they had a $100,000.00 deficit approximately including the bond amortization, is there a stipulated fact as to how much was raised from the dollar a head tax?

Mr. John K. Mallory, Jr.: Nothing has been raised from the dollar a head tax, sir.

The lower court enjoined, the Trial Court enjoined that in the collection and the Supreme Court of course of Indiana affirmed the Trial Court’s decision.

Justice Potter Stewart: Mr. Mallory, what is your point about the deficit only after the --

Mr. John K. Mallory, Jr.: I have none.

The Court raised and asked questions about yesterday.

My brother made a response saying that there was an operating deficit.

I said that --

Justice Potter Stewart: It’s still a deficit?

Mr. John K. Mallory, Jr.: It is still a deficit after bond retirement.

Yes, Your Honor, of something less than a $100,000.00.

Coming back to the question of whether or not this is a use tax and therefore a sense governed or controlled by the highway use tax cases.

The Indiana Supreme Court responded quite directly to the Airport Board’s argument that this charge is a service charge for the use of facilities and stated that there is no question that the incidence of the tax imposed by Ordinance 33 falls on interstate commerce.

And it also held that the tax is on the active enplanement.

Focused quite squarely on the issue of whether the act of enplanement was reasonably related to the use of airport facilities and held that and I quote that, “it is clear that the tax imposed by Ordinance 33 is not reasonably related to the use of the facilities which benefit from the tax.”

Trial court made similar findings stating that not withstanding the name given the charge nor the stated justification for the charge, its operating incidence is solely on the act of enplanement.

The Trial Court also made findings that the use of the airport by the minority who were taxed was no different in quality or amount than the use by the majority who were not taxed.

That it does depend on the act of enplanement and not use, I think it is clear from the reading of the ordinance itself.

It imposes what is called in the ordinance a use and service charge of $1.00 per each passenger enplaning any commercial aircraft operated from the Dress Memorial Airport.

It imposes on the airline the obligation to collect that tax and remit it to the state based on the number of enplaning passengers times the $1.00 charge.

The tax as the Trial Court and the Supreme Court noted is not imposed on all users only on a minority.

While those findings on the discriminatory nature of the charge form the basis of the Court’s holding in part of the basis of the Court’s holding under the Equal Protection Clause of the Fourteenth Amendment and also its holding of invalidity under the Nevada Constitution.

The arbitrary nature of the charge or selection of passengers –- selection of users who will be charged also formed its basis or partly formed its basis for the finding that it was not a use charge.

I submit that the fact that the funds collected under this tax go into the Airport Board funds for the use on the airport does not make this a use tax.

It is clearly a relevant consideration for the Court to consider in determining whether or not it is a use tax but it is not decisive.

And I think that McCarroll against Dixie Greyhound 309 U.S. points that out.

The Court there stated that it is not enough that the tax when collected is expended upon the state’s highways.

It must appear on the face of the statute of the demonstrable where the taxes laid is measured by or has some fair relationship to the use of the highways to which the charge is made.

Going back to a minute on this question of what the funds are to be used for, that argument indeed was made in Crandall against Nevada.

There at Page 38, “The state argued that the state makes roads, keeps them in repair, and must in some way be paid in order to be able to do all of this.”

And what difference does it make, whether it is to be paid by a tax of $1.00 on each passenger or by the same sum collected at a toll gate, or by gross sum for a license?

The Court in Crandall indicated that it made a good bit of difference as to whether it was constitutional to tax the passenger at $1.00 a head for leaving the state even though he had obviously used the roads, and the state had to build and keep them repaired.

Justice William H. Rehnquist: But wasn’t the tax in Crandall imposed on any departing passenger regardless of what means of --

Mr. John K. Mallory, Jr.: No, I don’t believe that’s fact Your Honor.

It was imposed on passengers in departing or leaving the state, as I recall, by stage coach railroad and it had another list of things.

Justice William H. Rehnquist: But supposing in Crandall, a passenger left by a railroad, there the state wouldn’t have a fair claim to say.

We’re just asking you to pay your share for the cost of constructing the means of transportation.

Mr. John K. Mallory, Jr.: Because the State did not construct the railroad.

Yes, Your Honor, I think that is quite right.

But they clearly had constructed the roads over which the stage coach passengers ran.

In Crandall, it is my recollection, Your Honor, that Crandall was a stage coach operator or owner who was contesting the statute.

Incidentally, the use of the proceeds was argued in the Henderson against the Mayor of New York case where two-thirds of the funds went to the Commissioner of Immigration for inspection and to build wards and warehouses.

In the Passenger case part of the funds went to a Marine Hospital in People against Compagnie Generale Transatlantique, the sums went to the Commission of Immigration for inspection expenses and the remainder was remitted to the United States Treasury.

The states at that time were seeking many ways to validate this type of tax.

And in each one, the argument would be made that the funds were being used to recompense the state for expenses made by it in tearing out its proper functions.

Justice William H. Rehnquist: How do you deal with Huse versus Glover on which Mr. Trockman relies?

Mr. John K. Mallory, Jr.: Well, I would deal with that in two ways, Your Honor.

First, it’s not a Commerce Clause but in fact I don’t think it is the most important ground.

It is the question under Article 1, Section 10 of the article.

Secondly, I deal with it by saying that there the Court quite properly found that it was a use tax and was not a tax on a passenger for engaging in interstate commerce.

And I think that the sum of these -- that these passengers are engaging in interstate commerce.

When they board the plane for the purpose of departure, I think it’s fairly obvious under the Michigan-Wisconsin Pipe Line case where the gathering of gas was considered a tax directly on interstate commerce.

I think the same thing is here.

The same thing is present here.

I think in the Joseph against Carter & Weeks which was a loading of freight case and Baltimore & Ohio against Birch which was the same type of case.

The Richfield Oil case where the Court said the commerce begins no later than delivery of oil into the vessel.

All of those, I think indicate very strongly that the passenger boarding the plane for the purpose of departure which is what enplanement means, that the passenger is engaged in interstate commerce and the tax that’s being imposed on him is a tax imposed on him for the privilege of engaging in that act.

And the cases that talk about a tax on a passenger engaged in interstate commerce or on a passenger, or on freight that’s being loaded or has been loaded for interstate commerce and striking down those statutes are extremely numerous.

Basically, you can probably start under the Commerce Clause.

I think that basically you can start to submit some of the language in the Passenger Cases.

Some of the language by two justices in the Crandall case plus the Perry case which just has a Black has a statement saying that you can’t pass passengers and the people and persons engaged in interstate commerce.

I think the Justice or Chief Justice Taney’s dissenting opinion in the Passenger Cases where he was talking about not aliens but persons who were traveling by ship from one state to another and who were taxed at the rate of 25 cents a head for departing the vessel in the State of New York.

His comment about those passengers is very strong in saying that the State cannot tax those.

And that dissent was later, I believe, quoted in Crandall and has been re-quoted in cases as recently as Gaston, I think, in the Shapiro case, Shapiro against Thompson as well.

In the Minnesota Rate Cases, the Court said, the States cannot tax interstate commerce either by a laying a tax upon the business which constitutes such commerce with the privilege of engaging in it or upon persons of property in transit in interstate commerce.

I would also submit that the fact that here the incident is the act of enplanement rather than use by the passenger, lends itself to considerable different multiple local taxation involving different incidents of travel and also differing amounts.

As to the amount of the tax, the Evansville Airport Board has stated here on that brief in an argument that even this $1.00 is not enough to cover the cost of their plan of improvements.

I do not dispute that at all.

Indeed, as the taxes grow, as this $1.00 becomes more the ingenuity of an Airport Board to plan other improvements can make a charge of almost any amount not excessive.

So I think that it is quite obvious to anticipate that there will be taxes if this ordinance is allowed to stand, there will be taxes by most local airports in this country.

The taxes, I think will vary in amount and I think that they will vary as to the incident of taxation.

I think some will be for deplaning passengers, some will be for stopover passengers, and some would be for in-transit passengers.

Unknown Speaker: The whole idea of the airport I supposed is to enplane and deplane passengers.

That’s its fundamental function?

Mr. John K. Mallory, Jr.: That is its fundamental function, Your Honor.

I think some have gotten away from that a little bit with fancy restaurants and things of that nature.

Unknown Speaker: Would you say it’s a general proposition that a city that wants to maintain an airport has a general proposition to make the passengers pay for the airport, the construction of the airport?

As Mr. Justice Rehnquist says, let’s just assume that everybody who walks through, who drives into or walks into the airport property is charged a fee and that just happens to be enough to pay for all the facilities there?

Mr. John K. Mallory, Jr.: I am not sure if they could, Your Honor.

I must confess that I probably can not answer --

Unknown Speaker: You mean, just because there might be interstate passengers?

Mr. John K. Mallory, Jr.: No, not just because there might be interstate passengers.

I think that it would depend on a great deal on the incidence of taxation.

If it were done by a toll, say to the access road, into the airport and for the use of that road that may have --

Unknown Speaker: Well, anybody who walks into the airport terminal pays it?

Anybody?

Mr. John K. Mallory, Jr.: In air freight and so on does not bear any of the obligation.

It us just passengers.

Unknown Speaker: Just passengers?

Mr. John K. Mallory, Jr.: I would have some problem with that by excluding freight, I am sure.

Justice William H. Rehnquist: Because it’s discriminatory on interstate commerce?

Mr. John K. Mallory, Jr.: No.

Well, yes because it discriminates against the passengers as opposed to making interstate commerce pay for the freight that it is carrying as well.

Unknown Speaker: Well, it is then --

Mr. John K. Mallory, Jr.: I am sorry?

Justice William H. Rehnquist: It is paying in case of freight? In the case of freight bill?

Mr. John K. Mallory, Jr.: But it does not pay any tax to construct the airport.

Chief Justice Warren E. Burger: Your time is up, Mr. Mallory.

Mr. Trockman, you have about two-and-a-half minutes left.

Argument of Howard P. Trockman

Mr. Howard P. Trockman: I will try to use them as useful as I can.

First of all, I would like to comment, Mr. Chief Justice and members of the Court, on Crandall versus Nevada.

There is no mention on this case whatsoever that this is a tax upon the use of facilities.

It is the tax upon the mere act of departure upon the privilege of going from one state to the other.

As a matter of fact, in 1868, when this case was decided, I am not even sure that there was a publicly maintained roadway for the use by a stage coach travel.

Certainly, the railroad tax filed with that case was not for the use of publicly supported facilities.

And as far as the application of that case is concerned, this was stricken and overruled by the case of Hendrick versus Maryland which was decided in 1915 by this Court.

And in this case, it said that with respect to the holding of Crandall versus Nevada involving a tax which was designed to prevent persons from leaving the State of Nevada, that it does not uphold that rationale because in Hendrick versus Maryland, where a tax was levied upon the use of highways by commercial motor vehicles, that this involved the use of valuable facilities provided in public expense and a burden to the taxpayers.

And therefore, the holding of Crandall was overruled.

And in Hendrick versus Maryland, which is cited at Pages 29 and 30 of our brief, the Court stated that the highways are public property just like our runways are.

It is within the power of the State to require those who make special use thereof to contribute to their cost in maintenance.

And this Court recognized in Hendrick versus Maryland, the distinction between commercial motor vehicles and pleasure cars and upheld the tax.

The same application applied in a flat fee in the Capitol Greyhound Lines case.

By the way, in that case as we have in our exhibit C is a list of states which have use taxes.

As to the national uniformity argument which my colleague argues, I would like to say this that the Panhandle Eastern case strikes down this argument by saying the power to taxes not the power to destroy.

And this we believe is a relevant holding cited by this Court and we feel that the use tax levied in this instance is fair and reasonable under the Commerce Clause.

Chief Justice Warren E. Burger: Thank you Mr. Trockman.

Thank you Mr. Mallory.

The case is submitted.

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Argument of John K. Mallory, Jr

Chief Justice Warren E. Burger: We'll hear arguments next in 70-212, Northeast Airlines against New Hampshire Aeronautics Commission.

Mr. Mallory, you may proceed whenever you are ready.

Mr. John K. Mallory, Jr: Mr. Chief Justice, may it please the Court.

This case is somewhat similar to the case just argued, here on appeal from the judgment of Supreme Court of New Hampshire, holding constitutional a New Hampshire State Statute.

The appellant airlines sought to enjoin enforcement of the statute which imposes on the airlines, this tax is imposed on the airline not the passenger, imposes on the airline a charge of $1 per passenger enplaned from New Hampshire airports.

The airlines contended that the statute was unconstitutional under the constitutional right to travel, Commerce Clause and Equal Protection Clause.

The Trial Court in New Hampshire transferred the case, including stipulated facts to the Supreme Court without any -- without determining any issues as it can do.

The Supreme Court in January 29, 1971 held a charge, it was charged on the airline, not the passenger and that it is not a “Service Fee” on common carriers of passengers for hire on a regular schedule.

That -- it held also that the incidence of the charge is on the enplanement of passengers, but it held that enplanement is a wholly intrastate event.

It held the statute constitutional.

The statute in New Hampshire as I have said imposes on the airline a charge of $1 per passenger for all passengers enplaning from the New Hampshire airport.

If however a scheduled airline uses planes with a gross weight of less than 12500 pounds, it charges 50 cents per enplaning passenger.

Charter carriers, contract carriers or charter carriers, not scheduled airlines, of over 12500 pounds are similarly taxed and charter carriers with planes of less than 12500 pounds do not pay.

The charge or tax on charter carriers ends when the funds contributed by the states -- by the state of New Hampshire to the airports has been repaid.

The charge on schedule carriers has no terminal time.

The collections from this charge or tax are remitted to the Aeronautics Commission, State Aeronautics Commission which distributes 50% of the funds to the state aeronautical fund and the remaining 50% to the municipality or Airport Authority owning the landing area.

There is no requirement that the municipality spend the monies received on airport facilities.

Under the -- the municipalities must place in aeronautical funds, funds collected under Chapter 423 of the New Hampshire laws, but the revenue collected under this particular section that we are talking about is not collected under 423, it is collected under 422.

Justice Harry A. Blackmun: Mr. Mallory, am I correct in my impression that the New Hampshire Supreme Court made no reference to this allocation of 50% to the general fund?

Mr. John K. Mallory, Jr: That is correct Your Honor.

Justice Harry A. Blackmun: Was it argued below?

Mr. John K. Mallory, Jr: It was argued on the motion for rehearing Your Honor and it is in the appendix as I recall at the very end, page -- starts at page 36, 36 A and runs over to page 42.

The particular argument is --

Justice Harry A. Blackmun: Well, it wasn’t raised prior to the motion for the rehearing?

Mr. John K. Mallory, Jr: That is correct, Your Honor, it was not raised prior to the motion for rehearing.

Justice Harry A. Blackmun: So that accept for the denial of the motion it was not treated in any depth at all by the New Hampshire Court?

Mr. John K. Mallory, Jr: No, the New Hampshire Court simply says that the money goes to the aeronautics fund which is making the statement appear that 100% goes to the aeronautics fund, that just isn't -- that isn't acted under the terms of the statute itself which lays out that 50% goes to the aeronautics fund and 50% to the municipality.

Again --

Justice Byron R. White: Does the record indicate how the facilities are --

Mr. John K. Mallory, Jr: There is in the record just the statement about landing fees and rentals and that type of state, but not in detail Your Honor.

Justice Byron R. White: Does the municipality contribute any funds to the airports authority?

Mr. John K. Mallory, Jr: Oh!

Yes, I think it does.

I think it does clearly.

Justice Byron R. White: Does the record show that?

Mr. John K. Mallory, Jr: I do not -- I can not say that the record specifically shows that I think --

Justice Byron R. White: Does the State Aeronautical Fund finance anything for airport?

Mr. John K. Mallory, Jr: No, the State Aeronautical Fund under the 1959 Statute, which I will come to in a minute, it is an older statute, did earmark the fund received under that statute for paying off bonds and notes incurred at the various airports.

The 1969 statute which is a one we are talking about now does not have that same provision and the State Aeronautical Commission can expand its funds for general aviation or for improving navigational facilities throughout the states that type of expenditure.

It does not have to spend the money on any particular airport, or the airport from which the funds were received.

Justice Potter Stewart: How many -- what are they -- three airports in New Hampshire, Lebanon, Keene, and Manchester?

Mr. John K. Mallory, Jr: No, then there is a Berlin and addition to that Berlin and Laconia.

Justice Potter Stewart: Laconia?

Mr. John K. Mallory, Jr: Yes Your Honor.

Justice Potter Stewart: Berlin has one too?

Mr. John K. Mallory, Jr: Yes, Your Honor.

Justice Potter Stewart: Berlin --

Mr. John K. Mallory, Jr: The court in New Hampshire, the Supreme Court, refused to follow Crandall and Nevada and the passenger cases, specifically stating that its reason for not following those were that those involved a tax directly on the passenger and not on the carrier as the court said was the case here.

It also refused to follow the Montana case and distinguished the Indiana case that we have just argued, the Evansville case, again on the ground that there the tax was on the passenger and here it is on the carrier and it distinguished the New Jersey case which had been decided by the Trial Court and the state withdrew its appeal on the ground that there the statute allowed the monies collected to go into the general funds of the cities which didn't own the airports.

The court noted that in 1959, it had rendered an advisory opinion on a similar statute, but one applicable only to carriers engaged in intrastate commerce.

It had upheld that statute and had noted in its opinion, in its advisory opinion that objection by anyone to the effect on interstate commerce was unlikely in view of the Aero Mayflower Transit case, 332 US and Terrell against Johnson, 86 New Hampshire.

We contend here that the New Hampshire Supreme Court erred in holding that the right to travel cases, including Crandall do not apply because the tax in New Hampshire is on the carrier rather than on the passengers.

We contend that, that is an error of law in determining that the tax in New Hampshire was on the carrier, not the passengers.

We contend that it also erred in failing to follow the Crandall line of cases because of its view that those cases were merely based on the theory of power to tax as a power to destroy.

We submit that it erred in holding that the act of enplanement, which it found was the incidence of taxation, is wholly an intrastate event.

Justice William H. Rehnquist: Mr. Mallory?

Mr. John K. Mallory, Jr: Yes Your Honor.

Justice William H. Rehnquist: You I take it at least in the Indiana case concede that the state can impose a use tax to make interstate commerce pay its fair share.

Mr. John K. Mallory, Jr: I -- yes sir.

Justice William H. Rehnquist: And yet you object that the type of taxes we're dealing with here are on the act of enplanement or on the commerce, and I grant that you can find that sort of distinction in some of our prior cases, it seems to me a very metaphysical kind of distinction?

Mr. John K. Mallory, Jr: I would submit Your Honor, that where the -- what I conceive be the right to travel is involved, that it is in fact a metaphysical.

That here a state in imposing a tax, but in this case on the carrier measured by the number of passengers but I think that it should be considered as one directly on the passenger when its the tax of this kind, where it can where doubt -- it do that.

I think that it clearly has the power, that it is exercising the power to control and to some extent suppress the right to travel or which is a right that I believe has more than just -- is based on more than just the Commerce Clause.

Justice William H. Rehnquist: Yet, you concede that a passenger doesn't have the right to travel at the state's expense?

Mr. John K. Mallory, Jr: Oh!

I concede that it doesn't have the right to travel on state's expense, yes.

Chief Justice Warren E. Burger: I thought you have virtually conceded that there were probably a good many ways in which the state or the local authority can do exactly what they're doing here in the same amount without a constitutional problem?

Mr. John K. Mallory, Jr: Indeed, Your Honor, I urge that they can and I think that the cases cited in all of the briefs that have been filed show the vast number of ways in which the state or a community can raise money.

Yesterday, the question of landing fees came up, clearly the state of an airport can impose landing fees that will raise a substantial amount of money.

The (Inaudible) can certainly be increased and raise money and both proceeds --

Chief Justice Warren E. Burger: Do you think these other ways of accomplishing the same end would be less burden on the right to travel?

Mr. John K. Mallory, Jr: Yes, Your Honor, I certainly do, I certainly do.

Chief Justice Warren E. Burger: Even if it is ultimately attached onto each individual passenger?

Mr. John K. Mallory, Jr: --It is bound to be ultimately attached onto the -- in some fashion to the price of transportation, but it is not attached sort of dollar or penny for penny on the head of the person traveling from for example Laconia to Boston.

The Laconia airport which I am fairly familiar is a very small airport.

It could stand I am sure a great deal of improvement and could probably would be a fairly small amount of traffic.

That could justify a very high enplanement charge without that charge being excessive.

It would certainly burden travel between Laconia and Boston if it did that.

Now, a gross receipts and a properly apportioned gross receipts tax or properly apportioned income tax, some other type of personal property tax on Airlines that would be borne by passengers traveling throughout the United States, instead of simply borne by those traveling, seeking to leave Laconia and get to Boston would be a very different thing, and it would also be under the regulatory control of the Civil Aeronautics Board which has the obligation and the power to allocate routes and to regulate these, so they can carry out its purpose in seeing that the nation is served by commercial carriers rather than just a particular route.

Justice William H. Rehnquist: Well, why isn't a landing fee which I take it under your line of reasoning would be a tax on the act of landing just as much of a burden on commerce or a tax on commerce as this head tax on the act of enplanement?

Mr. John K. Mallory, Jr: Well, Your Honor, I view a landing as a fee for the use of a airport and I think that basically that's what it is rather than --

Justice Byron R. White: Can you explain what are the acts that people do when they are using the airport?

Mr. John K. Mallory, Jr: It is certainly one of the acts that people do after they have used the airport, they get out after they have used the terminal, they are using the runway.

Justice Byron R. White: They are using it when they enter?

Mr. John K. Mallory, Jr: Yes sir, they are using it.

Justice Byron R. White: What is enplanement, it's getting on the airplane?

Mr. John K. Mallory, Jr: Enplanement by definition is the act of boarding the airplane with the intent to depart.

Justice Byron R. White: Yes, and --

Mr. John K. Mallory, Jr: For the purpose of departure, not with the intent to depart, but the purpose of departure.

Justice Byron R. White: Once your client is called that you go to the (Inaudible) engaged in enplanement?

Mr. John K. Mallory, Jr: I think you are engaged in enplanement when you board the aircraft You Honor for the propose of departure.

Justice Byron R. White: They are using the airport and that terminal?

Mr. John K. Mallory, Jr: Yes you are, you are.

Justice Byron R. White: They are using the airport when they land ?

Mr. John K. Mallory, Jr: You are, indeed you are and you are using it when you go there for any purpose.

Under these taxes, if you go to the airport, have your ticket, sit and wait, the plane is canceled for some reason, there is no tax.

If you board the plane and it takes off, there is a tax.

I do not know what happens with tax under those conditions.

Justice Thurgood Marshall: What about some of the trips on the Eastern coast where you take off and come back to the same airport, what would happen then?[Laughter]

Justice Harry A. Blackmun: What was the significance of your comments prior to last few questions about CAB allocating funds for the benefit of National Travel as whole?

Are you suggesting that all this is under-written by Federal funds?

Mr. John K. Mallory, Jr: I didn't mean to say, Your Honor, that the CAB allocates funds.

They allocate routes and have the obligation of determining rates that will resolved in a serve -- in a airline service throughout the country rather than the local government being -- or a State Government being able to impose a tax or a charge that will influence or it can influence the fares to such an extent that it restricts the right to travel from that state.

Justice Harry A. Blackmun: Well, let me rephrase my question.

You are here representing a number of airlines on these two cases?

Mr. John K. Mallory, Jr: Yes, Your Honor.

Justice Harry A. Blackmun: What do the airlines suggest is the solution for these cost problems?

Mr. John K. Mallory, Jr: I think the airline suggests some type of uniform charge.

Justice Harry A. Blackmun: By the facilities?

Mr. John K. Mallory, Jr: By -- well, by a uniform charge that would be imposed, that would flow back to facilities that need the money rather than publicly rather than a uniform charge by facilities themselves.

That would avoid the problem of the differing amounts and the differing incidence of taxation.

Justice Byron R. White: So they might be satisfied with higher landing fees?

Mr. John K. Mallory, Jr: Your honor, I say that higher landing fees are a way in which the airports can raise money without in my judgment violating the constitution.

Justice Byron R. White: Now, if they just raised the landing fees charged to the airlines, you would say, they may not like it, but you wouldn't have a constitutional argument?

Mr. John K. Mallory, Jr: I do not think I have a constitutional argument Your Honor, no.

Justice Harry A. Blackmun: Because airlines just do not like landing fees anyway, do they?

Mr. John K. Mallory, Jr: They certainly do not, Your Honor.

Justice Harry A. Blackmun: Going back to my other question now, where would you impose that charge that you speak off?

Are you saying again, I guess I am repeating, are you suggesting all of this be underwritten by Federal taxation?

Mr. John K. Mallory, Jr: When you say I am suggesting that there be a -- if it be deemed desirable to do it this way, that the Federal Government -- indeed the Secretary of Transportation, Secretary Wolfe (ph) at one point suggested to the House Ways and Means Committee, a Bill under which Congress would authorize the states to impose a reasonable charge on enplaning passengers if they could get the airline serving that airport to agree to that charge.

He talked in terms of $1 charge, then it would be a uniform charge.

Now I think that the question of obtaining uniformity here is extremely important in this -- in any way of raising money on the -- through any kind of enplaning tax.

Justice William H. Rehnquist: You mean that now of necessity the same charge should be made for using San Francisco International Airport as per the Evansville Airport or the Laconia Airport?

Mr. John K. Mallory, Jr: Under my proposal it would be, yes.

The charge would be the same.

Justice William H. Rehnquist: Even though the cost of construction per passenger might vary greatly?

Mr. John K. Mallory, Jr: That -- it may vary very greatly and the amount of the money that would then flow back to the San Francisco Airport may -- would vary, would definitely vary greatly from that flows to Laconia.

To go back to the New Hampshire Court’s refusal to follow Crandall because it stated that here the tax was on the carrier, not passenger.

We believe that the Court -- the Court also found in New Hampshire that the act, there was a service charge as I said.

I think a fair reading of the Court's opinion indicates that its finding, that it was a service charge, depends greatly, in substantial measure on its finding that the act of enplanement is a wholly intrastate act, which we contend is wrong under the cases.

Now the stipulation in New Hampshire again shows that a majority of the users are not taxed and it also shows that the use by the minority who are taxed is substantially no different from that of the majority who are not taxed.

Justice Byron R. White: I would think you would have the -- if your fundamental objection here or part of it is that this kind of a tax loads on to passengers and hence on new air travel generally, the cost of expanding an airport rather than spreading the cost on to the other users likewise, I don't know how you could -- why you wouldn't have the same objection to higher landing fees?

Mr. John K. Mallory, Jr: Because -- excuse me.

Higher landing fees at all airports simply go into the cost of operating an airline.

Justice Byron R. White: Well, I understand but this is --

Mr. John K. Mallory, Jr: They do not -- Excuse me I am sorry.

Justice Byron R. White: But if the airport, if the airport authorities determined, well we have to have so much money to finance an expansion.

We're going to increase landing fees so we can pay for them, so we can pay off the bonds we're going to issue.

And they don't, and they are stuck with their long-term leases on all the airport facilities in the airport, and so they have to load it on to air travel and they decide they will do it by landing fees.

Mr. John K. Mallory, Jr: That goes into the general cost of operating of the airlines --

Justice Byron R. White: I understand that but if --

Mr. John K. Mallory, Jr: -- and the fee -- and the fare from Laconia to Boston is not based entirely or even in large measure on the landing fee at the Laconia Airport.

Those costs are then -- you adjust your fares to recoup those costs.

Justice Byron R. White: But sooner or later it's going to cost people more to travel?

Mr. John K. Mallory, Jr: It's going to cost people more to travel, but it's not going to cost -– it's not going to be a direct burden on the passenger from Laconia to Boston.

Justice Byron R. White: Well how do you --

Mr. John K. Mallory, Jr: By the --

Justice Byron R. White: How do you even compounds the error?

Mr. John K. Mallory, Jr: I am sorry.

Justice Byron R. White: That compounds the error, doesn't it?

This means that you're loading onto a lot people who shouldn't be paying it, the cost of the Laconia facility.

Mr. John K. Mallory, Jr: I am not -- well, once you make the judgment that they shouldn't be paying it, I think that it would follow, your conclusion would follow.

I think that any of the costs, or right now the costs at Laconia on landing fees of $50 for Fairchild 227 and $75 for DC-9.

Now those costs are not just divided by the number of passengers carried from the airport in New Hampshire.

If that's wrong, it's wrong, but it's certainly not done that way.

Justice Thurgood Marshall: Mr. Mallory, suppose you combine the Evansville one with this one and this one in New Hampshire every dollar that was collected went into the airport, do we have any problem with that?

Mr. John K. Mallory, Jr: Yes sir, I do Your Honor.

I think that --

Justice Thurgood Marshall: I still can't see that difference between the landing fee and this?

Mr. John K. Mallory, Jr: Perhaps another lawyer will be arguing the landing --

Justice Thurgood Marshall: Except that [Voice Overlap]

Mr. John K. Mallory, Jr: -- but I am not prepared to --

Justice Thurgood Marshall: Well, I understand it's, your argument is the word enplaning, that one word?

Mr. John K. Mallory, Jr: That the tax -- no, well it's more than that one one word Your Honor.

Justice Thurgood Marshall: Well, what else?

Mr. John K. Mallory, Jr: The fact that it's a tax on enplanement, I think it takes it out of the use tax category in the Indiana case.

The fact that the taxable advantage, the act of enplanement, I submit brings it under Crandall against Nevada, the Passenger Cases, and a number of other cases, and indeed brings into play the --

Justice Thurgood Marshall: Well, on the landing -- the landing fee, you land for what purposes?

Two purposes, to let somebody off, and let somebody “enplane” --

Mr. John K. Mallory, Jr: Yes, Your Honor.

Justice Thurgood Marshall: -- but that's alright?

Mr. John K. Mallory, Jr: The landing fee?

Justice Thurgood Marshall: Yeah.

Mr. John K. Mallory, Jr: As far as I am prepared to say today, as I view the landing fee, it's alright, yes.

As I say, some other lawyer maybe here arguing the constitutionality of the landing fee with you, it's fine, but I am prepared to say that landing fee is alright under my view of the constitutionality.

Justice Thurgood Marshall: But the landing fees are paid for the use of the facilities at the airport?

Mr. John K. Mallory, Jr: That is correct, Your Honor.

It's not a direct paid tax -- it's not a direct tax on the passenger.

Justice Thurgood Marshall: And what is the enplaning fee?

Mr. John K. Mallory, Jr: The enplaning fee is a direct tax on the passenger.

The fact --

Justice Thurgood Marshall: Well, I thought here they collected it from Northeast?

Mr. John K. Mallory, Jr: Well -- I am coming to that the -- if I may Your Honor, see in the Passenger Cases, in Crandall, in Henderson against Mayor of New York, all of those were taxes in which it was argued that the tax was on the carrier.

There is no -- in the Crandall case the tax, in fact, was on the passenger, but it was argued that it was a tax on the carrier.

In the Passenger Cases, it was a tax on the master or the owner.

In Henderson against the Mayor of New York, it was a tax on the master or the owner.

In the Shay Wong (ph) case it was the tax on the master.

In People versus Compagnie Générale Transatlantique, it was a tax on the owner.

In each one of those cases, the Court was met with the argument that here is a tax on the carrier, it's not the passenger.

It's a use tax or it's a tax on the privilege of doing business.

In each one of those cases the Court looked through that, and specifically held that as a legal matter, as a constitutional matter a tax of this type on the carrier measured by flat rate per head on the passenger is to be viewed for constitutional purposes as a tax directly on the passenger.

Now the Supreme Court of New Hampshire ignored those cases.

It didn't -- they were brief, it did not discuss them at all in its opinion.

In the Passenger Cases, Chief Justice Taney in dissenting, but in discussing at the interstate, an intrastate tax, a tax on citizens moving from one state to another was also covered in those statutes and finding that that was unconstitutional specifically dealt with whether or not a tax of this type was one to be viewed is on the carrier or the passenger.

And he held that it was stated that, it was on holding that it was to be viewed as a tax on the passenger.

In Henderson against New York, the state was specifically trying to avoid the holding in the Passenger Cases.

And they made it absolutely clear that the charge was not on the passenger, but on the master gave them an alternative to post a bond or pay $1.50 for each passenger.

New York argued in that case that the tax, the Act I am sorry, the Act to be passed now by the Court does not impose a tax on the passenger.

The Act -- the state also argued that the Act cannot be tortured into an indirect mode of imposing a tax or duty upon the passenger as such.

The Court noted that argument and specifically stated, in whatever language a statute maybe framed its purpose must be determined by its natural reasonable effect, and if it is apparent that the object of this statute is judged by that criterion, is to compel the owners of vessels to pay sum of money for each passenger brought by them from a foreign shore and landed at the port of New York, it is as much a tax on the passengers, if collected from them, or a tax on the vessel owner for the exercise of the right of landing their passengers in that city, as was the statute held void in the Passenger Cases.

In Crandall against Nevada, the same argument was made, that it was a tax on the carrier.

In fact there the statute I think was fairly clear but it was on --

Justice Thurgood Marshall: Suppose the statute or the ordinance said that everybody that uses our runways shall pay $1 fees, everybody including the pilot, co-pilot, baggage handlers, everybody?

Mr. John K. Mallory, Jr: And private aviation as well and so on?

Justice Thurgood Marshall: Yes.

Mr. John K. Mallory, Jr: Well, I would suspect that under those views, the tax would probably be excessive that if in fact now.

Once you impose the tax generally it's going to be a much smaller amount.

In Indiana, for example, you had 85,000 take offs and landings by civil aviation and only 14 by commercial aviation.

Chief Justice Warren E. Burger: Your time is consumed, Mr. Mallory.

Mr. John K. Mallory, Jr: Thank you, Your Honor.

Chief Justice Warren E. Burger: Mr. Dunn.

Argument of Marans. W. Michael Dunn

Mr. Marans. W. Michael Dunn: Mr. Chief Justice, may it please the Court.

This particular case which we are discussing now, the New Hampshire statute, Chapter 391 is different from the previous case, at least in form and in fact I think it's different in substance.

Chapter 391 levies against a scheduled air passenger carrier, a service fee for the use of the state's facilities.

Now I would like to make one point here that our airports in New Hampshire are very similar to the -- currently the Indiana airport.

We have three airport authorities with which we are concerned here and two municipalities.

But for the most part, the expense of the airport, the operating expense and to a large extent the capital improvement expense is carried directly by the municipality or by the airport authority by some sort of, in that particular situation a property tax for the most part.

The Aeronautics Commission through -- the legislature does appropriate money for various activities at the airport, and the Aeronautics Commission has money that it receives through fees and so forth, which is expended to these airports.

Justice Potter Stewart: That's state-wide, the Aeronautics Commission?

Mr. Marans. W. Michael Dunn: That's right, that's state-wide.

However, this fee only affects at the present time five airports and before a fee is collected at these airports, it's a condition precedent, that both the state and the municipality or the airport authority contribute money to the operating expenses or construction expenses, not just one of them.

The statute is set out, it is a levy against the carrier in it's terms, the Attorney General is authorized to -- in a civil suit to sue the carrier, if the carrier does not remit the service fee, returns are made by the carrier.

The proceeds are to go, 50% to the airport authority or municipality from which the fee is measured and 50% to the Aeronautics Commission or to the treasury to be covered into the aeronautical fund.

Now, this aeronautical fund can only be used for air navigational aids.

Now the money that goes to the municipality for the airport authority for the most part, I tend to agree there was not a restriction that it must be used for air navigational aids as such.

But as you look at the total picture, they are paying most of the bill to the airport anyway and the fee would never replenish the amount that they are paying out.

Justice Harry A. Blackmun: And now is that fact, a weakness in your case and the structure of the tax?

Mr. Marans. W. Michael Dunn: Not in my opinion, because the --

Justice Byron R. White: Does that say that you are supported by the record in this case?

Mr. Marans. W. Michael Dunn: Well, unfortunately, the tax was not -- the landing or service fee was not tax on the basis that it was excessive, so there was no record whatsoever.

Now that we come in and prove that it was not, it was never attacked.

I think without doubt we could show that it's not excessive at all.

Justice Byron R. White: But both the municipality and the state aeronautics board contribute to this airport or to each airport more than they are getting out of this tax?

Mr. Marans. W. Michael Dunn: Well, they certainly contributed more than they were receiving before and there is certainly too with regard to the municipality that a trip contributing more than they are going to get out of this tax.

With the regard to the aeronautical fund perhaps there might be some money that could come in but it must be used to maintain or operate.

If there is any surplus, it must be used for air navigational aids.

Justice Byron R. White: Well, we're just in no position on this record to put that question?

Mr. Marans. W. Michael Dunn: No, not really and the reason is it was not attacked as excessive and there was -- the state had no burden in my opinion of showing how the money was actually used and proving in fact that it was not excessive.

Now the fee under the New Hampshire statute, the fee is against the air carrier for the use of state and municipally funded facilities, and it is measured by two criteria, the weight of the aircraft, and the benefit for right of the carrier in terms of the number of enplanements, or the number of people who would get on it.

I would like to go back to a question that was posed by Mr. Justice White and discussed further by Mr. Justice Blackmun yesterday, with regard to the Indiana case.

And the question was, why not simply increase the landing fees?

Now, the New Hampshire answer to that question, because it does seem like a far more simple thing to do without perhaps any constitutional problems, was posed to the Commission and their answer was this.

This would be an inequitable burden against the air carrier to simply double or triple the landing fee.

Now, the fact that we are opposing each other here and the fact that the state indicates that the fee is constitutionally airlines in the case that it is not, does not mean that there is not some harmony with the regard to the Aeronautics Commission and the airlines.

We do not want to burden the airlines to such an extent they cannot do business in New Hampshire.

Justice Byron R. White: You say it would be inequitable.

Well, why would it be an inequitable way of raising this money?

Mr. Marans. W. Michael Dunn: Because the airlines, as the Aeronautics Commission have looked at it, cannot afford to have their landing fee doubled or tripled, at this point.

Therefore, they instead indicated that they would rather have this sort of a used fee, which would allow the airlines to grow and would not immediately tomorrow or a year ago double the cost of doing businesses on Laconia --

Justice Byron R. White: This would just obviate necessity of getting a rate increase?

Mr. Marans. W. Michael Dunn: That's right, perhaps it’s practical.

Justice Byron R. White: This is -- rather than increasing their expenses and making less profit under the existing rates, this would be an alternative way of raising the money and charging the passengers?

Mr. Marans. W. Michael Dunn: Well, no, as far --

Justice Byron R. White: Without affecting either rates of profit?

Mr. Marans. W. Michael Dunn: Now there is no doubt that under the New Hampshire statute --

Justice Byron R. White: Was that right?

Mr. Marans. W. Michael Dunn: Right.

I am now speaking for the Commission, I am not a member of the Commission and I am -- the answer that was given to me was that it would be too burdensome on the to double or triple rate.

Justice Thurgood Marshall: Mr. Dunn, you are trying to convince me that it's easier for me to pay the dollar than Northeast Airlines?

Mr. Marans. W. Michael Dunn: Now I think, it's not, it not easy if you were to pay the dollar to the Northeast Airlines, however, in the end, I think [Voice Overlap].

Justice Thurgood Marshall: There is no real problem, you are afraid if you raise then they’ll all overfly your airport, do you agree?

Mr. Marans. W. Michael Dunn: Well, I am not -- I think the real problem is the fact that the landing fees are negotiated.

They are apparently an extremely touching subject.

They are frequently renegotiated as the certified air carrier relinquishes its commitment to a lower class carrier and they are extremely touching and the practical problem is that service, they fear their service will diminish considerably if a double or triple landing fees is imposed.

It's very, very touchy area.

Justice William H. Rehnquist: But if you’re talking about raising the same amount of money by two alternative ways, one by increasing the landing fee, and one by imposing a type of tax that New Hampshire imposed, isn't the ultimate burden on the airlines going to be the same?

Mr. Marans. W. Michael Dunn: The ultimate burden on the airline, I think ultimately will be the same.

However under the New Hampshire statutory scheme, as more people use the airline, the burden will become somewhat greater.

Justice Byron R. White: Oh yes, but didn't your law ought to say that the airline may pass it on to the customer?

Mr. Marans. W. Michael Dunn: Yes.

Now the --

Justice Byron R. White: So that it doesn't increase the burden on the airline?

Mr. Marans. W. Michael Dunn: Oh!

No.

Justice Byron R. White: If they pass it onto the customer?

Mr. Marans. W. Michael Dunn: No, our law says nothing herein shall prohibit such fee from being passed onto the customer.

Justice Byron R. White: And the fee is being passed on --

Mr. Marans. W. Michael Dunn: Well, now that's -- the two appellants are passing it on, yes, but with regard to the other air carriers that are not litigating this matter, one air carrier is not passing it on and one air carrier is.

Now, as far as passing on this particular dollar fee, the statute simply levies a charge measured by two items now, the weight of the carrier and the number of people that get on.

Now, they may very well pass it on or they might not pass it on.

I think after --

Justice Byron R. White: But if they do pass it on, there is a difference between the landing fee and this kind of a tax.

It is too much of burden on the airline?

Mr. Marans. W. Michael Dunn: Yes, I would agree --

Justice Byron R. White: Quite a bit?

Mr. Marans. W. Michael Dunn: -- if they do pass it on.

However, if their expenses are going to increase necessarily for a short time and their profits will diminish if there is a landing but a landing fee however, it will be raised, and I think that --

Justice Byron R. White: If they can get a rate increase out of the CAB?

Mr. Marans. W. Michael Dunn: Now it would, perhaps.

I mean I think that's -- they certainly may get a rate increased out of CAB, that is beyond -- we cannot control that.

Justice William H. Rehnquist: But that is the only way they can pass on a landing fee basically is to get a rate increase out the CAB?

Mr. Marans. W. Michael Dunn: I would agree with it.

With regard to the fact that this tax is levied against the air passenger carrier and against the contract carrier which is not in litigation here, there is particularly is good reason for this.

Number 1, that the carriers derive their livelihood, they use regulatory routes, they are in and out all the time.

And secondly, all of the expansion in the New Hampshire Airports can almost be traced directly to the change of facilities of the air carrier.

For instance, the DC-3, it was changed to the DC-6.

It needed a longer runway and now that I believe they are changing to a DC-9.

The change of facilities of the air carriers appears to be one step ahead of the change of the airport.

So most of the capital expense and a great deal of the operating expense is directly due to the fact that these airports are used by commercial air carriers.

Number 2, is the safety devices that must be maintained because the cargo here is passengers, and this is -- although some safety devices of course would be there even if they had non-commercial flights.

I think it would definitely be increased by the fact that you have the commercial flights.

I think when this statute is analyzed, it is possible to look at it as a correct and proper use fee levied against the carrier measured by the weight of the -- measured by two criteria, the weight of the carrier, that is the wear and tear presumptively on the runway, and number 2, the benefit provided by the use of the facility.

Now the benefit might not necessarily be equivalent to the number of times they land, particularly in New Hampshire, or Laconia or Berlin.

They may very well land and takeoff with no one.

They may have not received a terrific benefit, they may land in Manchester and pick up more people.

So the benefit here is and the fact number 1, the use, the wear and tear, the weight of the aircraft, and the benefit is reflected by actually the number of people that they pick up.

Justice Potter Stewart: This is a take-off fee, not a landing fee.

Is not it?

It's a take-off fee imposed on a carrier depending on two things, the weight of the aircraft and how many people got aboard at that airport, is that right?

Mr. Marans. W. Michael Dunn: Yes, you are right.

However, I would like to make one comment about the characterization as a take-off fee.

It is our opinion and contention that this is a simple way to measure the benefit derived and it would be immaterial for instance whether we call it a deplaning fee or an enplaning fee, or a take-off fee or whatever because we're only using it as a yardstick to measure the benefit.

Therefore, in my opinion, it would be excessive for instance for us to tax the enplanements, and then tender a tax on deplanements and so forth, because the benefit would then be doubled and it would be out of proportion.

Justice Potter Stewart: Now, I am just trying to understand your theory that this a use tax imposed on a carrier and -- for the the incident is a take-off and the measure the tax is two things, the weight of the plane, and how many people got aboard at that airport, is it right?

Mr. Marans. W. Michael Dunn: That is our contention, Your Honor.

Justice Potter Stewart: And the carrier has the option of passing on the tax to the -- spreading it among the people who got aboard at that airport at a dollar a head, is that it?

Mr. Marans. W. Michael Dunn: That's right.

Justice Potter Stewart: And these carriers do -- the common carriers do as I understand?

Mr. Marans. W. Michael Dunn: Well --

Justice Potter Stewart: Well, how can Northeast --

Mr. Marans. W. Michael Dunn: That's right.

The two --

Justice Potter Stewart: Does executive still run up there?

Mr. Marans. W. Michael Dunn: Among certain, it is a week-to-week basis.

Justice Potter Stewart: I know, it was last time, I know.

Mr. Marans. W. Michael Dunn: I think executive --

Justice Potter Stewart: But, there are contract carriers?

Mr. Marans. W. Michael Dunn: There are contract carriers and they are well -- there is a change in the -- however they are not taxed or the use fee does not apply if they are under a certain weight.

But, if they are a large contract carrier, it applies and they pay use fee, some absorb the fee and some do not.

Justice Byron R. White: Has there been any suggestion by any of the airlines that this kind of tax is forbidden as inconsistent with the regulating authorities of CAB?

Mr. Marans. W. Michael Dunn: No, I do not think.

There has been -- they were suggesting in the brief that -- I mean, perhaps I should say yes.

There was a suggestion in the brief that Congress because of the need for uniformity has a right to speak and even though they have not spoken in the sense that they can make the rights that are demanded, they have been made for all.

Justice Byron R. White: (Inaudible) that an airline pass on the landing fee?

Mr. Marans. W. Michael Dunn: As it was regard to the state law and in my opinion, it was recently regard to the constitutional, well -- I think they could pass it.

Justice Byron R. White: Well, how about statutory or how about the -- that's normally been considered an expense, that it is taken into consideration of setting a fare, hasn't it?

Mr. Marans. W. Michael Dunn: That's right.

Now, the answer is I do not know if they are forbidden by the CAB to pass on.

Justice Byron R. White: Wouldn't you be surprised if that was permissible for the carrier to have an authorized rate and then suddenly take some of these expenses on which the rate is based instead of charging it directly to the passengers?

Mr. Marans. W. Michael Dunn: Yes, I would --

Justice Byron R. White: Wouldn't you think that would be very odd?

Mr. Marans. W. Michael Dunn: I would.

Justice Byron R. White: Now how about a take off fee?

Mr. Marans. W. Michael Dunn: Rather than a landing fee or other than an enplanement fee?

Justice Byron R. White: Yes.

Mr. Marans. W. Michael Dunn: You mean an enplanement fee as we are discussing here?

Justice Byron R. White: Yes, anytime you charge an air carrier something for the use of an airport, it seems to me like it would be charging the same sort of thing as a landing fee.

It is an expense for the air carrier.

Mr. Marans. W. Michael Dunn: Yeah, I agree.

I agree.

Justice Byron R. White: What business does the airline company got passing it onto the passenger?

It is an expense that is supposed to be reflected in their fare?

Mr. Marans. W. Michael Dunn: Now, I could --

Justice Byron R. White: Some of the airlines are not doing it, are they?

Mr. Marans. W. Michael Dunn: That's right.

Chief Justice Warren E. Burger: Why?

Mr. Marans. W. Michael Dunn: I do not know if it is an administrative problem or if it is a legal problem.

Justice Byron R. White: Well, I would think they will probably go to the -- whatever it is they are absorbing, they will say it is part of their expense for the next go around for the raise?

Mr. Marans. W. Michael Dunn: I am certain they will, I am certain they will.

Now, I think it could be argued by, perhaps by someone who is in a position to do so that they shouldn't pass it onto the passengers.

Now, our statute in no way tells them or demands that they do pass it on.

Justice Byron R. White: Alright, but again I would say -- and I just wonder if -- I just wonder if there just hasn't been any question that the airline at this kind of a tax which requires the airline to charge a customer more than its public fares, is it consistent with this federal statute?

Mr. Marans. W. Michael Dunn: Now, my answer is I do not know that it is or is not consistent.

Justice William H. Rehnquist: Of course it is not and exactly I could say this tax requires the airline to tax (Inaudible)

Mr. Marans. W. Michael Dunn: Well, in the sense, no.

I would even say no, it does not authorize them, so it says nothing herein shall prevent them from doing, as it is as if nothing was said whatsoever.

Now, I am talking about New Hampshire law.

Justice Byron R. White: You can increase your landing fee without interfering with anything that Congress is doing, and here you are charging an airline more for using the airport?

Mr. Marans. W. Michael Dunn: We are, that's right, absolutely.

Justice Byron R. White: Now, the airline is free to do what it wants to with it?

Mr. Marans. W. Michael Dunn: Yes.

Well, we say that --

Justice Byron R. White: It may not be --

Chief Justice Warren E. Burger: But it is free until the CAB tells them they can't do it, is that about it?

Mr. Marans. W. Michael Dunn: Yes.

That is our position.

We are not -- we are not demanding that they pass it on, and we don't restrict the fact that they are --

Justice Byron R. White: Well, in this respect, you are different from the Indiana case?

Mr. Marans. W. Michael Dunn: Oh!

Yes.

In my opinion we are considerably different from the Indiana case.

Justice William H. Rehnquist: Presumably, no part of the New Hampshire statute is violated if it turns out if the CAB says the airline can't pass on the tax?

Mr. Marans. W. Michael Dunn: That's true.

That would be my --

The New Hampshire statute and the statutory scheme which was -- we attempted -- that the legislature attempted to pass, simply is a use fee against a carrier non-discriminantly imposed that is against all carriers whether intrastate or interstate, whether the flight is intrastate or whether the flight is interstate.

For the benefits they have received and will receive, all of the funds, all of the funds of the state receives must go to air navigational aid and regard to the funds, regard to the municipality, that simply either goes to air navigational aid or replaces money that has been spent for air navigational aid.

Justice Byron R. White: Could I ask a just a question?

Are the airlines who are represented here all passing the tax on or not?

Mr. Marans. W. Michael Dunn: It is my opinion that they are passing the tax on in my assumption from the last time I find from the case.

The New Hampshire position simply is this is a use fee against the airline, non-discriminantly imposed and it is not excessive, and it is not necessarily a fee against a passenger.

Nor we all do --

Justice Thurgood Marshall: It is none of your business whether it is passed on or not?

Mr. Marans. W. Michael Dunn: That's right.

Justice Thurgood Marshall: You could not stop them from there --

Mr. Marans. W. Michael Dunn: No, in my opinion we couldn't --

Justice Thurgood Marshall: And you could not force them to pass it on?

Mr. Marans. W. Michael Dunn: Not under the statute, no and we do not force them to pass it on.

Chief Justice Warren E. Burger: Are there any other facilities at the airport for which a charge is made, an observation platform, is this practiced in --

Mr. Marans. W. Michael Dunn: Well, we have in my opinion, what I know about fix based operators at some of the airports.

They do work on airplanes, they pay a fee.

We have a fee with regard to landing of general aviation.

Now, that fee --

Chief Justice Warren E. Burger: On private planes?

Mr. Marans. W. Michael Dunn: Private planes.

Now, that fee is remarkable as it seems is about 8 times greater at some airports than the landing fee with regard to the commercial aviation.

It is a quite a bit more than landed general private plane for a landing.

Chief Justice Warren E. Burger: The only thing that prevents a state or a local airport from raising the landing fee is the process of negotiation with the airline and the risk that they may curtail their service, isn't that a problem?

Mr. Marans. W. Michael Dunn: Now this -- I agree.

Now, this is not necessarily a legal point and I do not even think it is a constitutional point by any stretch of imagination but it is an extremely valid practical point that these are negotiated and they are terrifically afraid of, terrifically poor service if the landing fee is too high.

Now, this is just a fact of life with which the Aeronautics Commission and the municipalities and the airport authorities are faced with.

With regard to other fees at the airport, there are rentals at some airport which is no different than any other building which rents space.

But, the interesting point is that where -- for instance at Lebanon, a landing fee for a scheduled passenger carrier might be approximately $1.67 per landing.

It would be for the same carrier over $12,512 for general aviation aircraft to land.

So that there is a certain amount of harmony between the municipalities and the air carriers.

We need -- we want their business, we need their facilities where we are trying to provide facilities further.

This is not a necessarily, strictly advisory thing when you get out of the airport so to speak.

This is strictly a use fee levied against a carrier for facilities provided.

Chief Justice Warren E. Burger: Thank you Mr. Dunn and thank you Mr. Mallory.

The case is submitted.