adverted to in the course of this opinion only to the extent deemed necessary to an understanding of the discussion of the legal issues.
I. Factual Background
Allegheny was originally certificated by the PUC in 1941 to transport property by air in intrastate commerce within Pennsylvania pursuant to the Pennsylvania "Public Utilities Law ", 66 PS § 1101, et seq. In January, 1949 Allegheny received a certificate from the Civil Aeronautics Board (CAB), the federal regulatory agency established under the Federal Aviation Act, 49 U.S.C. § 1301 et seq., to provide interstate passenger service over a route structure covering the District of Columbia and seven states, including Pennsylvania. In March, 1949 the PUC approved Allegheny's application to transport persons and property by air in intrastate commerce within Pennsylvania. The intrastate routes authorized by the PUC paralleled Allegheny's interstate routes within the boundaries of Pennsylvania.
Under its CAB certificate, Allegheny is a "local service" carrier, i.e., one which provides service between smaller cities, linking them with larger ones where connections can be made with the "trunk line" carriers (e.g., American Airlines, United Air Lines) which primarily provide long haul service between larger cities. Allegheny is now the largest "local service" carrier in the United States, with an interstate route structure covering seventeen states, the District of Columbia and parts of Canada. Allegheny has intrastate rights in nine of those states, including Pennsylvania. For the fiscal year ending September 30, 1969 its gross revenues aggregated almost $113,000,000, including a federal subsidy
of approximately $3,000,000. A little more than 2% of Allegheny's 1969 revenues were generated by intrastate traffic within Pennsylvania.
For the efficient operation of its interstate routes, Allegheny makes frequent changes in its patterns of service and schedules. Under federal law, Allegheny is permitted to make such changes without interference from the CAB so long as it provides adequate service. 49 U.S.C. §§ 1371(e)(4), 1374(a). See Capital Airlines, Inc. v. Civil Aeronautics Bd., 108 U.S. App. D.C. 215, 281 F.2d 48 (1960). The CAB does not require Allegheny to maintain direct plane service between intermediate points on its interstate routes, it being sufficient if Allegheny services each intermediate point on such routes by two round trips in each direction each day, regardless of point of origin or destination.
In 1963 Allegheny discontinued single plane direct service on the 71-mile Williamsport-Harrisburg segment of its PUC intrastate route No. 5. Since that time it has discontinued furnishing single plane direct service between some other pairs of points on its six intrastate routes
authorized by the PUC. It has also been furnishing service between some intrastate points not specified in its PUC certificate. The PUC has taken the position that its certificate requires Allegheny to maintain single plane direct service between all pairs of points on authorized intrastate routes in Pennsylvania, and that Allegheny may not provide intrastate service between points within Pennsylvania not specified in the PUC certificate.
After attempts to resolve the matter amicably the PUC issued rules (at different times) on Allegheny to show cause why its state certificate should not be cancelled or other penalties imposed (a) for abandoning direct plane service between Williamsport and Harrisburg; (b) for abandoning direct plane service between other pairs of points on its intrastate routes; and (c) for furnishing intrastate service not authorized by the PUC. At the hearing on the rule to show cause on the abandonment of Williamsport-Harrisburg direct service
Allegheny declined to present evidence and answered only that the PUC lacked jurisdiction over routes, flight frequency and schedules of intrastate carriage of persons and property where that service is part of a federally certificated route operated by a federally certificated interstate carrier operating under the rules and regulations of the CAB.
On June 23, 1969 the PUC entered an order making the rule absolute, imposing a fine of $5000 on Allegheny and directing Allegheny to reinstitute direct service between Williamsport and Harrisburg within thirty days or file a petition with the PUC to abandon such service. After the time for filing an appeal from the PUC order to the state courts had passed, Allegheny instituted the instant suit to enjoin the PUC and the individual members thereof from taking any actions against Allegheny or its officers based upon changes in patterns of service or frequency or scheduling of service.
Because of the nationwide impact of the outcome of this suit on the federal-state roles in the economic regulation of air commerce, both the CAB and the National Association of Regulatory Utility Commissioners (NARUC) sought, and were granted, leave to file briefs amicus curiae. The CAB also participated in oral argument. The CAB supported Allegheny's contentions on the merits but took "no position with respect to procedural issues or questions of judicial jurisdiction." (CAB's brief, page 6). NARUC's brief supports the PUC both on the merits and, in particular, in attacking the propriety of federal intervention in the absence of exhaustion of state processes.
It is Allegheny's position in the instant suit that the PUC's attempt to exercise control over it is invalid as a matter of federal law because (a) the field of economic regulation of interstate air carriers, at least insofar as patterns of service and scheduling are concerned, has been preempted by the Federal Aviation Act of 1958, 49 U.S.C. § 1301 et seq., particularly §§ 1302
of the Act; (b) the PUC orders conflict with Allegheny's rights and obligations under its CAB certificate of public convenience and necessity; and, (c) the PUC orders attempting to regulate patterns of service and scheduling impose an undue burden on interstate air commerce. Although Allegheny and the CAB concede that the states have authority to control certain economic aspects
of intrastate air commerce, they contend that such authority does not extend to a federally certificated air carrier servicing an interstate-intrastate route. Accordingly, Allegheny asserts that its dispute with the PUC presents a controversy arising under the Constitution and laws of the United States and that this court's jurisdiction
is properly invoked under 28 U.S.C. § 1331(a).
It asserts further that the federal courts should decide the federal questions rather than leave them for determination by state tribunals. I disagree.
In suits in the federal courts arising out of proceedings pending or threatened in state tribunals, the federal court's jurisdiction may not be predicated upon federal question defenses to the state proceedings.
See Public Serv. Comm'n of Utah v. Wycoff, 344 U.S. 237, 73 S. Ct. 236, 97 L. Ed. 291 (1952); Public Utilities Comm'n of California v. United Air Lines, Inc., 346 U.S. 402, 98 L. Ed. 140, 74 S. Ct. 151 (1953); rev'g 109 F. Supp. 13 (N.D. Cal. 1952); California v. Oroville-Wyandotte Irrigation Dist., 409 F.2d 532 (9th Cir. 1969); Bonanza Air Lines, Inc. v. Public Serv. Comm'n of Nevada, 186 F. Supp. 674 (D. Nev. 1960). It is only if the state complaint raises federal questions that the federal court's jurisdiction may be based on federal question grounds. Public Serv. Comm'n of Utah v. Wycoff, supra.
Allegheny, in the instant suit, seeks a declaration that since it is an interstate carrier, it is immune, as a matter of federal law, from the exercise of control by the PUC. The proceedings instituted by the PUC against Allegheny, however, raise only questions of state law, i.e., the extent of the rights and duties conferred upon Allegheny by the state certificate of public convenience and necessity issued pursuant to Pennsylvania's "Public Utility Law", 66 P.S. § 1101 et seq. The PUC's complaints raise no federal questions. The federal questions do not enter the picture until they are injected by Allegheny as a matter of defense to the state complaints. Under such circumstances, to quote from Wycoff, supra, at p. 248:
"federal courts will not seize litigations from state courts merely because one, normally a defendant, goes to federal court to begin his federal-law defense before the state court begins the case under state law."
Although this is not properly a federal question matter, there is nevertheless jurisdiction in this court on the grounds of diversity of citizenship. 28 U.S.C. § 1332(a).
It affirmatively appears from Allegheny's complaint that it is a Delaware corporation with its principal place of business in the District of Columbia; that the PUC is an agency of the Commonwealth of Pennsylvania; that the individual defendants are all citizens and residents of the Commonwealth of Pennsylvania; and that the amount in controversy exceeds $10,000, consequently, this court has jurisdiction on diversity grounds.
III. Propriety of Federal Intervention
Notwithstanding that there is jurisdiction, the question remains whether this court should hear and determine the substantive issues raised by the parties and exercise its power to grant the relief requested. The relief which Allegheny seeks is (1) a declaration that it is not subject to control by the PUC because it is an interstate carrier, and (2) a permanent injunction restraining enforcement of PUC's orders against it or its employees.
Although Allegheny's complaint is not, in terms, brought under the Declaratory Judgment Act, 28 U.S.C. § 2201, the first portion of its prayer for relief is declaratory in nature. The Declaratory Judgment Act provides that in a case of actual controversy a competent federal court "may declare the rights and other legal relations of any interested party . . . whether or not further relief is or could be sought." But whether to grant declaratory relief in a particular case is a matter committed to the court's sound discretion. See A. L. Mechling Barge Lines, Inc. v. United States, 368 U.S. 324, 7 L. Ed. 2d 317, 82 S. Ct. 337 (1961); Brillhart v. Excess Ins. Co., 316 U.S. 491, 86 L. Ed. 1620, 62 S. Ct. 1173 (1942); California v. Oroville-Wyandotte Irrigation Dist., supra.
The second portion of the relief sought is injunctive and whether a federal court should use its equity powers to enjoin the enforcement of orders of a state administrative agency is also a matter for the exercise of the court's sound discretion. Alabama Public Serv. Comm'n v. Southern Ry. Co., 341 U.S. 341, 95 L. Ed. 1002, 71 S. Ct. 762 (1951).
The Supreme Court of the United States has ruled that where a private party seeks either declaratory or injunctive relief against a state administrative agency, federal courts ordinarily should abstain from exercising their powers in the interest of federal-state comity. Public Serv. Comm'n of Utah v. Wycoff, supra ; Alabama Public Serv. Comm'n v. Southern Ry. Co., supra. In Wycoff there was express disapproval of attempts by lower federal courts to give anticipatory declarations as to state regulatory statutes, including determinations as to the authority of a state administrative agency over an interstate carrier, the Supreme Court stating, at p. 247:
"It is the state courts which have the first and last word as to the meaning of state statutes and whether a particular order is within the legislative terms of reference so as to make it the action of the State."